It's that time of year where people start wondering what to do about 1099s (or even if they have to do anything!), so we're here to walk you through the basics, to give you a leg up on your tax filings.
What's actually required? You’re required to file a 1099-MISC information return when you pay an independent contractor or vendor over $600 in a calendar year.
The IRS Uses 1099 to Identify Underreporting
The IRS requires “information returns” so that they have a way to independently verify a person or business’s income. When you receive a 1099 form in the mail, you should know that the IRS has also received that information and stored it in your file. This lets them flag taxpayers who are underreporting their earnings.
What Employees Does It Apply To?
You must file for most contractors and vendors that receive at least $600 from you in a calendar year. As a business, you are required to file a 1099 for any entity that you pay over $600 in a calendar year, unless they meet an exception:
- You don’t have to report payments to a corporation, unless they’re a law firm
- You don’t have to report wages paid to employees, which are reported on W-2/W-3
- Other exceptions including telegrams and fish purchases for cash (really!)
(You can find the full exception list on the first page of the 1099 instructions)
You Can File Yourself, But It's A Pain
You’ll need to print and mail 1099-MISC forms to your vendors. Accounting software like Quickbooks can help with this. In addition, you’ll need to print a scan-able copy of each 1099 and submit to the IRS. You need to order these forms from the IRS, or purchase them from an office supply store.
You Can File With Justworks
We know that 1099s aren’t rocket science, but they’re a hassle. When you pay a contractor or vendor with Justworks, we’ll mail them a 1099 at the end of the year, and file an information return electronically with the IRS. This service is included free of charge with all Justworks packages.
Why does your business need an accountable expense plan?
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.