Minimize End Of Year Tax Stress For 1099 Contractors
As a business owner, tax season is inevitably a busy time of year. However, working with independent contractors can add an entirely new layer of chaos to the mix. You can easily find yourself spending countless hours trying to gather relevant and required tax data on any of the independent contractors you paid in the previous year to get them a 1099.
This year, keep the stress levels to a minimum. Follow a few simple pointers and suggestions to keep your year-end 1099 prep process as streamlined and straightforward as possible.
Business owners are required to obtain a completed Form W-9 from any independent contractors before they receive payment for services rendered and regardless of how much money they receive as payment. Visit the IRS website to download the form and send to your independent contractors. Your 1099 vendors will fill out the vital information you need (name, address, business name, taxpayer identification number, etc.) so you’ll have it on file when the tax year comes to a close.
Who Should Receive A 1099?
Knowing who should receive a 1099 is also a key step in reducing stress and inconvenience come tax time. Typically, you should send a 1099 to:
As a general guideline, anyone who you pay for services rendered directly to your trade or business should receive a 1099. Consultants, designers, accountants, cleaning companies, and designers are just some of the many outsourced service providers who should receive a 1099. If you pay someone who is not your direct employee for a service, chances are, they should be treated as an independent consultant.
Does your business rent office space, land, or equipment? You may be required to 1099 them for the amount of rent they have received for the tax year.
Yes, you must send 1099s to sole proprietorships, partnerships, and LLCs that get taxed as partnerships or sole proprietorships. However, you do not have to send along a 1099 to Corporations or Tax Exempt entities. Not sure if a service provider falls into a 1099 category? The Form W-9 will give you the information you need on the entity type.
You should always send a 1099 to anyone you’ve paid $600 or more throughout the duration of the tax year.
Still have questions about 1099s? We have answers. Contact Leone, McDonnell, and Roberts today to hear more.