As the year draws to a close, it’s time to start preparing for 1099 filing season. Issuing 1099s is a critical task for businesses that work with contractors, landlords, and other non-employees. Waiting until January to gather the necessary information can lead to unnecessary stress and potential penalties. In this post, we’ll walk you through five essential steps to prepare your 1099s, ensuring a smooth filing process in the new year.
1. Review Your Vendor and Contractor Records
Take the time to review your financial records for the year. Identify any vendors or contractors who were paid the reporting threshold or more for services, and verify the latest requirements with the IRS to ensure compliance. Common examples include freelancers, consultants, and independent contractors.
Tip: If you use accounting software, most systems have reports to track payments to vendors meeting 1099 requirements.
Additional Resource: Refer to the IRS Instructions for Forms 1099-MISC and 1099-NEC to confirm the current reporting threshold and guidelines.
2. Collect or Update W-9 Forms
Ensure you have a current W-9 form on file for each contractor. This form includes the contractor’s name, business name (if applicable), address, and Taxpayer Identification Number (TIN).
Tip: If you’re missing W-9s, reach out to contractors now to avoid delays in January.
3. Determine the Right 1099 Form
- Use Form 1099-NEC for non-employee compensation (e.g., payments to contractors for services).
- Use Form 1099-MISC for other payments, such as rent, prizes, or legal settlements.
Tip: Check the IRS website for clear guidance on which form applies to specific payments.
4. Verify Payment Methods
Payments made via credit card or third-party networks (like PayPal) are usually reported by the payment processor on a 1099-K, so you may not need to include them on a 1099 you issue.
Tip: Double-check your payment records to avoid duplicate reporting.
5. Plan Ahead for January Deadlines
The deadline for sending 1099 forms to recipients is January 31, 2025. Make sure you also file copies with the IRS by this date, whether electronically or by mail.
Tip: Consider using e-filing software or services to ensure timeliness and accuracy.
Conclusion:
Taking the time in December to prepare for 1099 filing will save you stress and help you avoid costly penalties. Use these steps to organize your records and tackle your reporting obligations head-on. For more information about 1099 filing requirements, visit the IRS 1099 Information Page.