As the seasons change, it’s a great time to proactively review your subcontractor list for 1099 purposes. First, we need to understand what a 1099 is and if your business is required to file 1099s.
What is a 1099?
1099 forms are used to report non-employment income to the IRS. Businesses must issue 1099 forms to any vendor (other than a corporation, nonprofit, or an LLC that is treated as a C-Corp or S-Corp) to whom they paid $600 or more during the year . 1099s are due to the recipient by January 31st of the year following when the service was provided and paid.
Why do this now?
We know that many consider 1099s a year-end task that should be done in December and January. However, we believed that it’s important to conduct a 1099 mid-year review. Collecting the 1099 information is a very simple process; however, if you wait to start this process at the last minute, you could have a lot to do at once. In fact, we noticed that clients who have been running 1099 reports throughout the year are able to request any missing data from vendors in a much more timely manner.
Another reason that we should perform a 1099 mid-year review is that those businesses you paid a year ago may not always be easy to reach. Whether the contractor you hired is still in business, moved, or has closed their doors, you are still legally obligated to send them a 1099. For this reason, when working with contractors, we recommend clients obtain signed W-9 forms before making any payments. Practicing this method of record keeping can save you a huge amount of time and stress when it comes to year end.
Conducting a 1099 Mid-Year Review
Below are the steps we use to conduct 1099 mid-year review:
- Pull a 1099 vendor report and make sure all details are up to date.
- Make sure all the W-9 papers are on file and tied to data you have in your books.
- Review newly created vendors that may qualify for 1099 reporting.
- Make sure the books are up to date, reconciled, and all checks are cleared.
- Make sure you have the correct 1099 type noted for each vendor based on the services they provided.
- If there is missing info, reach out to the vendors and request.
- Make corrections to 1099 vendors’ settings and balances as needed.
Filing forms 1099 can be complex, and any mistakes can lead to penalties. So, it is always important to begin the process early to avoid any last-minute rush or complications. At Wheeler, we believe that performing a 1099 mid-year review is crucial to be better prepared for year-end reporting. By proactively gathering the necessary information, and requesting form W-9s throughout the year, we can ensure compliance and simplify the reporting process.
Contact the office if you need assistance with your 1099 mid-year review.
408-252-1800
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