Ready or not, here comes another tax season. That usually spells countless hours of 1099 preparation for business owners, CPAs, accounting professionals, and independent contractors. Whether you’re a veteran or rookie when it comes to filling out this documentation, it’s imperative to know the basics.
Here are some 1099 frequently asked questions and answers you should understand prior to filing, as referenced from Entrepreneur:
Who should receive a Form 1099 in the first place? – As a business owner, you must send 1099s to individuals (vendors or subcontractors) you paid more than $600. This includes any partnership, limited liability company, limited partnership, or estate. If your organization paid more than $10 in royalties, made direct sales of at least $5,000 of consumer products, or withheld any federal income tax under the backup withholding rates, the IRS also expects you to file Form 1099.
Are there any exceptions? – Not everyone needs a 1099. For example, you don’t have to worry about sending this form to vendors operating as S or C-Corporations, partnerships, merchandise sellers, and rent payments to or through real estate agents. It doesn’t hurt to check with your accountant beforehand.
Do I really need to send my lawyer a Form 1099? – Sure, your lawyer might be “incorporated” and what appears to be a standup individual. That said, Uncle Sam still wants to double-check their income. Remember to send them a Form 1099 if you paid them more than $600.
Can’t I just download a bunch of 1099 forms and send them out to my vendors? – Unfortunately not. Because the form is pre-printed in triplicate, you must order the forms directly from the IRS and then pick them up from an approved service center (post office, for example). Continue reading for an easier way to go about completing your 1099 forms.
Am I required to file electronically? – Here’s the deal: If you have more than 250 forms to file, Uncle Sam requires that you file electronically. Failing to do so could be cause for a penalty of up $100 per return. So make it easy on everyone, including yourself, and file electronically.
Can foreign workers file their own 1099? – It’s up to you to file 1099s on behalf of any non-U.S. citizens. Not only are you tasked with verifying foreign workers, but you must confirm where work was performed. To make things easier on yourself in the future, consider having foreign workers fill out, sign, and return to you Form W-8BEN.
Is it really a big deal if I ignore the 1099 process altogether? – Nobody wants to be on the bad side of the IRS, but especially business owners and independent contractors. If you’re a business owner, you can expect heavy penalties for failing to file, submitting incorrect information, and failing to provide recipient copies. It’s also worth mentioning that penalties usually increase with time. So file as soon as possible and get back to running your business.
File 1099 Forms Online
Maybe this is the year you finally invest in a reliable 1099 preparation system. Here at OnlineFileTaxes.com, we make the process simple and stress-free from start to finish. When you e-file 1099 forms with OnlineFileTaxes, you eliminate the need to buy and fill out lengthy forms.
That’s not the only benefit, though. Our innovative system allows you to process any number of forms, from one to hundreds in a seamless and economical manner. Never again will you have to throw away money on expensive software or get hit with outrageous administrative and IT costs associated with year-end 1099 processing.
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Contact us today with any questions.