Now that we’ve entered the final week of October, the end of the year will be here before we know it. If your business has made payments of over $600 to any vendor throughout the year, now is the perfect time to begin collecting and assembling the information needed to file your annual 1099 forms.
What is a Form 1099?
A Form 1099 is typically filed to report annual payment of more than $600 to some person or entity, especially if the payment is expected to be reported as an expense. The form is issued to put the payee on notice that they need to report the payment as income. Simply stated, a Form 1099 must be sent to anyone paid money unless they meet one or more of the following exceptions:
- The recipient is a corporation
- The payment is included in a W-2 form
- The payment is for tangible products such as office supplies or computers
- The total payments during the calendar year were less than $600
Most often payments reported on a 1099 are for services, rents, prizes, awards, and interest. However, since this is the tax code, there are always exceptions to the rule. Common exceptions include legal fees paid to attorneys, payments to for-profit medical corporations, and fishing related payments.
If you are unclear about the rules, it is best to consult with one of our qualified tax professionals for assistance.
Where to Start: Form W-9
The most important form a business needs to have on file for all non-corporate vendors is a Form W-9. This form collects the following information on the vendor, which is used to prepare a proper Form 1099:
- Correct legal name
- Type of entity
- Tax ID number
Best Practice Tip: Always obtain a Form W-9 from vendors prior to making any payment. This will help avoid issues and complications that may arise while trying to collect information after the fact and at the end of the year when deadlines are approaching.
Failure to file a correct Form 1099 or provide correct payee statements, without reasonable cause, may subject a payer to a penalty. The deadline to file Form 1099 is January 31 for the previous tax year (for tax year 2014 the deadline is January 31, 2015).
HBE Becker Meyer Love LLP provides Form 1099 filing services for all types of businesses and individuals that may need assistance with this process. If you need help, or if you have any questions about Form 1099 requirements or exceptions, please contact our office at 402.423.4343. Our team of experts is available to assist you with all your tax and accounting needs.