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Welcome to Our Blog!

Check back for current news on our company and the financial industry.

Are You Recording Information for 1099s?

If you use independent contractors to perform services for your business or rental and you pay them $600 or more for the year, you are required to issue them a Form 1099 after the end of the year to avoid facing the loss of the deduction for their labor and expenses.  (This requirement generally does not apply for payments made to a corporation.)

Many small business owners and landlords overlook this requirement during the year, and when the end of the year arrives and it is time to issue 1099s to contractors, they realize they have not collected the required documentation. Often it is difficult to acquire the contractor’s information after the fact, especially from those contractors with no intention of reporting the income.

As example, you have a repairman out early in the year, pay him less than $600, then use his services again later, and as a result, the total you’ve paid him for the year exceeds the $600 limit.  You realize you overlooked getting the information needed to file the 1099s for the year, and so will have to spend your valuable time contacting the repairman to obtain the information.  Therefore, it is good practice to always have individuals who are not incorporated complete and sign the IRS Form W-9 the first time you use their services.  Having a properly completed and signed Form W-9 for all independent contractors and service providers eliminates any oversights and protects you against IRS penalties and conflicts.

IRS Form W-9, “Request for Taxpayer Identification Number and Certification” is provided by the government as a means for you to obtain the data required from your vendors in order to file the 1099s. It also provides you with verification that you complied with the law should the vendor provide you with incorrect information. We highly recommend that you have a potential vendor or independent contractor complete the Form W-9 prior to engaging in business with him or her.

If you have questions or need copies of the Form W-9, please call this office at 888-564-5777.  We can also assist you with your 1099 filing requirements next January.