Q: I am a small business owner – do I need to worry about issuing 1099s?
A: Yes. If your business paid more than $600 to a vendor or subcontractor during the year, you are required to issue a 1099-NEC form to them and file a copy with the Internal Revenue Service. This requirement is based on the total amount paid during the tax year, meaning you may meet the requirement through a series of smaller payments.
Q: When do 1099s need to be filed by?
A: Forms must be filed by January 31st of the following year, and failure to file can result in penalties. Most accountants and tax preparers can assist you with this process.
Q: How do I obtain the proper information about my vendor or subcontractor in order to issue them a 1099?
A: You should ask each of your vendors and subcontractors to fill out a W-9 Form. This form contains key information like their business name, address, and tax identification number.
Q: Do I also need to provide 1099s to my employees?
A: No. If you have W-2 employees, they do not need to receive a 1099.
Q: What happens if I receive a 1099 from someone else?
A: If you receive a 1099, you’ll need to include the information from this form as part of your tax return. Consider connecting with a professional tax preparer to make sure you are reporting this information correctly and taking advantage of any potential deductions.
Whatever stage you are at in owning your business, it is never too early to invest in understanding your financial position and setting yourself up for the future. If you’re looking for a professional who can take the complexity and headache out of tax planning, contact us today at kataxandconsulting@gmail.com
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