It’s almost the end of the year and tax time is just around the corner. It’s the perfect time to think ahead and how to avoid the headaches of every year, including gathering the data to issue your 1099’s on time.
Form 1099-MISC is mostly used to report payments to independent contractors. Form 1099-MISC is not the same as a W-2 (W-2 is issued by the employer to report wages paid to the employees).
Issue a Form 1099-MISC to any person whom you have paid at least $600 in rents, services performed by someone who is not your employee; prizes and awards; other income payments; medical and health care payments; payments to an attorney; or if you have paid at least $10 in royalties or broker payments instead of dividends or tax-exempt interest.
Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. There is no need to report any payments made by credit card as the credit card processing companies report their own payments.
Use this checklist to get ready:
- Get a form W-9 for each new contractor you had this year.
- Have your books up to date by January
- Mail all Forms 1099-MISC by January 31, for payments made during the previous year.
So, on or before January 31, 2018, you should mail all your Forms 1099-MISC for any payments made during 2017.
Once you get it all done for the first time, try to develop the habit of always requesting new contractors/vendors to fill out form W-9, and provide with insurance certificates before their first payment. They will agree to it because they want to get paid.
If during the course of the year any of your contractors notify they have a new address, request an updated W-9. You can find a downloadable and fillable Form W-9 on our resources tab. If you need help with your 1099’s, we will be more than happy to help you.
If you have a contractor that doesn’t have a SSN, you can use their Individual Tax Identification Number (ITIN) or Tax ID, instead. If one of your contractors doesn’t have SSN or ITIN, you can still issue a Form 1099-MISC and in the box where you would write the SSN or ITIN write Applied For. This way you have complied with your 1099 filing responsibility.
If you are a contractor and will receive Form 1099-MISC from your clients, match the amount shown on Box 7 to the payments you received during 2017 from the client issuing the form. If your records do not match the amount shown, contact them ask for a print out of the payments you received and compare to your financial records. If a mistake was made in the amount on box 7, report it to the issuing client and they will file a new corrected Form-1099 MISC.