Who Needs a 1099?

Who Needs a 1099?

So the people that you’re going to want to issue a 1099 to are people that you have paid $600 or more in services for during the calendar year. When I say people, it could be individuals, it could be companies, the $600 is an accumulative amount for the whole year and it is for services not for goods. That is a really important distinction. 

Great example of somebody who would need a 1099 is if your business pays a graphic designer for a new website and you pay them $3,000. You would issue a 1099 to that graphic designer. It could be to an individual designing it, it could be to a company. If you order business cards and letterheads and things like that for $3,000 – the same amount – you would not issue a 1099 to them because you’re receiving something in return. So you’re receiving a material item.

There are two other services that you would issue a 1099. That would be for rent you pay and then any attorney you pay for services rendered during the year. If they amount to more than $600 you will also have to issue a 1099 to them.

There’s always exceptions to every rule, isn’t there? There’s two exceptions here. Anybody you pay using a credit card or a merchant like PayPal or Square or something like that. And the reason why is because that Merchant company will actually issue them a 1099 so if you issue one and PayPal issues one, they’re being double reported and it would be inaccurate.

You do not need to issue a 1099 to corporations. But how do you know if a company is a corporation? You actually need to simply request their W-9 and on that form it will have a box checked that they are a corporation.

I would strongly recommend that you request a W-9 before you pay anybody. And the reason why is because 1099’s are due January 31st. If you don’t have that W-9 on file, you’re going to be scrambling trying to get that information. And you’re just less likely to actually get it. You also run into a problem where perhaps one of your service providers doesn’t really want to share their information with you because they don’t want you to report that to the IRS.

I would actually recommend for business owners to hire someone to prepare their 1099’s. All of this is stressful, it’s overwhelming, and very confusing. If you would like for us to prepare your 1099, please send us a text or an email or even give us a phone call. Let us know that you would like for us to prepare them by January 10th. The 1099’s are due January 31st, so we want to make sure we have you in the line and we can guarantee we can get them filed for you.

Here at Accountabilities, we try to unravel all of that for you and we take it from confusion to clarity.