It’s that time of year again! We’re watching 2018 come to a close and at Beyond we are reminded of the many necessary tasks that accompany the end of the year. One of these is the filing of 1099-MISC and other information returns. Below are some frequently asked questions that we’ve received in the past and answers that all small business owners should know.
What is a 1099-MISC form?
1099-MISC forms are information filings required by the Internal Revenue Service (IRS). They are due at the start of each year for payments made within the last calendar year. Forms are required to be issued to the payees as well as filed with IRS.
For whom do I need to file 1099-MISC forms?
You are required to file 1099-MISC forms if, in the course of business, you’ve paid any of the following:
- More than $10 in royalties
- At least $600 for rent
- At least $600 for services rendered, prizes and awards, medical and healthcare payments, or payments to attorneys.
There are several other specific conditions in which 1099-MISC forms must be filed but these do not apply to most small businesses. Exceptions do exist for these filings. For example, payments made by credit card do not need to be reported on 1099-MISC forms and some payments to corporations.
What could happen if I do not file the required 1099-MISC forms?
If you do not file the required 1099 forms by the due date and you cannot show reasonable cause, you may be subject to a penalty. A penalty may be levied if you fail to file by the due date or if information is missing or incorrect on the returns. Penalties can be as high as $270 per information return.
How can I prepare for 1099-MISC filings?
Preparation is key to avoiding a hectic 1099-MISC filing season. Just as with onboarding a new employee, there are steps that you should take before issuing payment to a new subcontractor or to anyone else that would require a 1099-MISC form. For each of such vendors, a W9 form should be requested and received before payment is issued. This will ensure that you have all the information that you need in order to file the necessary forms. We recommend that when these are received they are scanned and uploaded as attachments to the contact in your accounting system. This essential step is something we recommend you do throughout the year.
There are many ever-changing rules that govern how 1099-MISC forms are prepared and filed. But there is no need to worry. Here at Beyond, we help many of our clients prepare 1099-MISC forms each year. We would be happy to help you. Please let us know if you would like our assistance in preparing your 1099s for 2018.