January 24, 2015

Are You Required to File 1099s?

Article Highlights:

• 1099-MISC Filing Requirements
• Independent Contractor Filing Threshold
• Form W-9

If you use independent contractors to perform services for your business and you pay them $600 or more for the year, you are required to issue them a Form 1099-MISC after the end of the year to avoid facing the loss of the deduction for their labor and expenses. The 1099s for 2014 must be provided to the independent contractor no later than February 2, 2015.

It is not uncommon to, say, have a repairman out early in the year, pay him less than $600, and then use his services again later and have the total for the year exceed the $600 limit. As a result, you overlook getting the information, such as their complete name and tax identification number (TIN), needed to file the 1099s for the year. Therefore, it is good practice to have individuals who are not incorporated complete and sign the IRS Form W-9 the first time you use their services. Having properly completed and signed Form W-9s for all independent contractors and service providers eliminates any oversights and protects you against IRS penalties and conflicts.

IRS Form W-9 is provided by the government as a means for you to obtain the data required to file the 1099s for your vendors. This data includes the vendor’s name, address, type of business entity and TIN (usually a Social Security number or an Employer Identification Number), plus certifications as to the ID number and citizenship status, among others. It also provides you with verification that you complied with the law should the vendor provide you with incorrect information. We highly recommend that you have a potential vendor complete the Form W-9 prior to engaging in business with them. The form can either be printed out or filled onscreen and then printed out. A Spanish-language version is also available. The W-9 is for your use only and is not submitted to the IRS. The W-9 was last revised by the IRS in December 2014, so if you previously printed out blank W-9s to give to your vendors, you may want to print copies of the latest version (including the instructions) and discard the older unused forms.

To avoid a penalty, the government’s copies of the 1099s must to be sent to the IRS by March 2, 2015, along with transmittal Form 1096. They must be submitted on magnetic media or on optically scannable forms.

This firm provides 1099 preparation services. Click here to download a form to list those for whom you must file a 1099. If you need assistance or have questions, please give our office a call at (860) 563-6443.