Getting Ready for 1099s
If you haven’t thought about sending out 1099s for your contractors since this time last year, you are probably behind the 8 ball and it’s a source of stress. Don’t fret! There are easy ways to gather the information you need to send out and file your 1099s by January 31st.
First, determine to whom you may need to send a 1099. Anyone you paid less than $600, paid through PayPal, or by credit card can be excluded. If you made some payments to a contractor by credit card/PayPal and some by check, if those check/cash payments total more than $600, you will have to send a 1099.
Keep in mind that it isn’t just people to whom subcontracted out work for your business. If you paid someone to do bookkeeping, advertising, social media, clean your office or make deliveries, you may have to send them a 1099. In general, if the person/entity that you contracted with is a Sub S or C Corporation, you don’t have to send a 1099. The only way to be sure is if you request a W-9. An except is attorneys. If you pay a lawyer, no matter what type of entity the attorney or firm is, you must send a 1099.
So now you should have a list of who may need a 1099 from you. If you collected W-9s when you hired your subcontractors great. I’ll go over how to easily create, send and file 1099s later in the month. If you didn’t, don’t despair, there’s still time.
The old fashion and slow way to collect W-9s is to mail them, request them in person or fax them to your contractors. If you see your contractors regularly, this is an awesome option. You can download the form at https://www.irs.gov/pub/irs-pdf/fw9.pdf. If your contractors are remote or you haven’t worked with them for a while, faxing may still be a good option. I prefer to do it electronically.
If you use a service like Docusign, HelloSign, Rightsignature or other document signing software, you can upload the W-9 and set it up for online completion. Then all you do is email the request to your contractors – and follow up until you get the document. Some people will resist sending you a W-9, especially individuals and sole proprietors, because they think that if they don’t get a 1099 they don’t have to claim the income. While this isn’t true, it is why it’s better to get a W-9 at the start of working relationship.
Online document execution services are great and can be done for free if you only have a few W-9s to collect or already use the service. There is another option if you don’t use one of those services and/or have several to collect. I use Track W-9, for $9 you can get up to 25 W-9s executed. https://www.track1099.com/ You can also try it for free. There are other services too, https://www.whiskey9.com/ is one. For the average business owner they are usually more car than you need.
Once you have your W-9, you must save them. Ideally, you can save them in the contact record of your bookkeeping platform. If that’s not possible (and if it’s not we really need to talk), make sure you save a copy in a safe place such as your hard drive and a backup somewhere. Hard copies are great too, but hard to search for when you need them.
One final caveat, if you have a W-9 for a contractor but you received it years ago, ask for a new one, especially if their payment information has changed. It isn’t unheard of for a company to change its filing status from sole proprietor or partnership to Sub S or C Corp. You could be sending a 1099 you don’t have to or the company may have a new Tax Payer ID of which you are unaware.
If you have any questions about how you can gather your 1099 information, please drop us an email, give us a call or message us on Facebook. We are happy to help.