1099 Rules, Limits, and Deadlines
So, you’ve used the services of a couple of 1099 contractors this year and you’re wondering about who must be issued a 1099 form and who needn’t receive one. Well read on below for a couple of quick tips regarding who requires a 1099 form and when they need it by.
The Income Threshold
As a rule, every independent contractor to whom you pay $600 or more will require a 1099 form. The money can take different forms: bonuses, fees, prizes, rents, or other payments will count towards the total. (So, don’t think you can get around the requirement for issuing a 1099 form by recategorizing how you pay your independent contractors!)
You get a form! You get a form! Everybody gets a form!
Again, as a rule, everyone who qualifies as a contractor and earns $600 or more from you gets a form. There are a huge number of exceptions though. S-Corps or C-Corps, some LLC’s or partnerships, vendors in certain lines of business, etc. For a complete and comprehensive list of who you should not be giving 1099s to you should consult with your lawyer, accountant, or bookkeeper. Just be sure to keep in mind that, unless a contractor clearly falls within a written exemption, they must receive a 1099.
Inform Yourself
You may be wondering how you can find out whether, for example, a contractor you use is taxed as an S-Corporation. All this sort of information should be included on a W-9 form the contractor provides to you.
Rather than request and utilize W-9 forms on an ad-hoc basis, it is a best practice to request W-9 forms from any contractor you expect you may pay over $600 during a taxation year. By adhering to this practice, you’ll have the information you need before you need it.
The Deadline
The deadline for sending all your contractors a completed 1099 is January 31. The same deadline applies for filing the same forms with the Internal Revenue Service. (When you receive the physical forms, which must be ordered from the IRS, they are in triplicate: one copy for the contractor, one for the taxman, and one for your records.)
Must I File Electronically?
The IRS imposes a limit of 250 physical 1099 returns per tax year. Now, as a small firm, this limit likely doesn’t apply to you. But just in case you use a lot of independent contractors, you should be aware that filing 251 or more physical 1099s with the IRS can result in a penalty of up to $100 per return.
Contact Us!
Are you unsure about the 1099 process? Are you still confused about that one vendor who may or may not receive a form? Perhaps you have no idea what a W-9 is or how you go about requesting one from your contractors. Contact us! We’re here to help and we’d love to assist you with your 1099, or any other, issues. Just drop us a line in the contact form below.