All businesses are required to issue Form 1099-MISC or Form 1099-NEC to relevant vendors, freelancers, and contractors, as well as file these forms with the IRS by January 31 for the prior tax year.
Businesses should ask vendors, freelancers, and contractors to fill out a W9 form as soon as you start working with them. A complete W9 will include correct business/payee name, correct EIN/SSN/TIN, and correct mailing address. Make sure that you can read everything on the form clearly, so the information entered on the 1099 form is correct. Having this information on file will make issuing 1099s much smoother, as you won’t have to scramble to collect W9s at the end of the year.
Some general rules:
- Law firms, attorneys, and medical offices, regardless of entity type, get 1099-ed
- Employment settlements get 1099-ed // Personal injury (PI) settlements DO NOT
- The payment must be $600 or more, if less than $600, 1099 IS NOT NEEDED
- If you paid a vendor with a credit card – DO NOT 1099
- Rent payments to Non-Corporate commercial landlords receive a 1099
The penalties for not filing 1099s can add up quickly ($50 – $260+ per form, depending on the length of delay in filing), so make sure you are collecting those W9s early! We may sound like a broken record, but it’s important – One of the smartest procedures a business owner can implement is to request a W9 from any vendor before you pay them. Your CPA will thank you!