Everything you need to know about 1099s

What’s the deadline?
The 1099 deadline (specifically 1099-MISC) is January 31, 2018. You must send all 1099s to the recipients AND file them with the IRS by this deadline. This is a change from previous years, so take note!

 

Who receives one?
If you paid $600 or more to an unincorporated person or vendor for services related to your business using cash, check, or bank transfer (ACH) you need to issue them a 1099-MISC.

 

What if I paid them with PayPal or credit card?
If you paid an unincorporated vendor using PayPal, credit card, or other third party merchant, the payment service is responsible for reporting this information (usually by issuing a 1099-K). You don’t have to do a thing!

 

 

What if I paid them with the PayPal Friends and Family option?
If you paid a person or business via PayPal’s Friends and Family option, you will need to issue a 1099-MISC to them. When you use this method to transfer funds, PayPal assumes it’s a non-business transaction and doesn’t include it in their 1099-K.

 

How do I file a 1099-MISC?

1. Make a list of those who meet the qualifications for receiving a 1099-MISC.
2. Send them a W-9 to collect their Taxpayer ID Number, address, and business name.
3. Create an account with com.
4. Create a payer which will be your business information.
5. Create the payees. This is everyone who needs to receive a 1099 (Use W-9 info).
6. Enter the amount of “nonemployee compensation” each person received.
7. Choose the option to have the 1099 mailed to the recipient. Huge time saver.
8. File the 1099s after carefully reviewing them.

 

What happens if I’m supposed to receive a 1099, but don’t?
You should report all income received, whether you receive a 1099 or not. No need to file one for yourself or delay your tax filing if someone doesn’t send you a 1099 or sends you a late one.

 

What happens if I’m supposed to issue a 1099, but don’t?
You may have to pay a penalty to the IRS. The amount of the penalty is based on when you file the correct information with the IRS and the contractor.