Each year we prepare hundreds of 1099s for our clients. As we’ve discussed in previous blog posts, the IRS requires businesses to file 1099s each year for specific vendors and payments.
Many of our clients have filed 1099s for themselves at one point or another. Often they are very surprised when we go to prepare their 1099s for the first time as we generally will ask about payments to vendors that they never even considered as potentially needing a 1099.
Since 1099 time is almost upon us, it is a good time to ask yourself: Should I hire a professional to prepare my 1099s?
Just because we make it look easy…doesn’t mean it is
Reviewing your accounting records to identify the vendors requiring 1099s and determining what amounts should be reported in which box is no small task. A professional bookkeeper has the skills and know-how to locate 1099 eligible vendors and payments that may not be apparent to the average business owner. For example, many know the $600 rule. You are required to file a 1099-MISC to vendors to whom you have paid $600 or more for services. But did you know that for some types of payments the threshold drops to $10?
What’s more, 1099 reporting requirements can be frustratingly variable. Each year the IRS publishes new instructions. The 2019 Instructions for Form 1099-MISC published by the IRS is 11 pages of detailed directives full of technical terms. For example, in July 2019, the IRS released a draft Form 1099-NEC that will appear to replace some 1099-MISC filings beginning in 2020. A professional bookkeeper keeps abreast of all these changes so as to adapt as deftly as possible.
Since your bookkeeper is managing your books, they have the requisite skills to sift through hundreds or thousands of transactions and locate all the vendors that could possibly require a 1099. Some payments could be hiding in places you may not think to look at. Since your bookkeeper is familiar with your specific transactions, they know all the places to look. It’s what they do and they can put all that experience to work for you and your business.
Professionals know the tools to use to get the job done correctly and efficiently. Your professional bookkeeper is no exception. These tools they are expert at using can ensure the information submitted on the 1099s is complete and accurate. Some of these tools can even check the vendor information against the IRS database. When you hire a professional to prepare and file your 1099s, you get all the benefits of the tools without having to spend your own time and energy into learning how to use them.
But doesn’t Gusto file my 1099s?
Many of our clients use Gusto, or a similar payroll solution, for their payroll and also to pay their contractors. We love Gusto here at Beyond. One of the many great things about Gusto is that they will file 1099s for the subcontractors that you pay through Gusto. So if you’re using Gusto, does that mean your business is covered? Not necessarily.
It is still a good idea to have your bookkeeper do a comprehensive review of your books to see if there are payments that are not included in Gusto’s 1099 reporting. For example, it is common for us to find that our clients using Gusto have made payments to contractors outside of Gusto and that these payments were never recorded in Gusto. The result from this is that Gusto will issue an incorrect 1099. Because of this, when we do our review for 1099s we include a review of the payments made to subcontractors in Gusto as well, to ensure that the 1099s to be issued by Gusto will be correct.
Another consideration is that most businesses have payments in addition to payments to contractors that could be subject to 1099s, such as expenses for rent, professional services and possibly even for interest paid or royalties. Here at Beyond, as part of our review for 1099s, we look at all payments made that could be subject to 1099 reporting. We firmly believe that the benefits of this review are invaluable to your business and especially to your own peace of mind.
If you find all this a bit overwhelming, you are not alone. You can spare yourself this particular headache. Hand it off and experience the immediate relief that follows. You have enough to do with running your business without worrying about 1099s and all the work entailed in their preparation!
Please let us know if you would like our assistance in preparing your 1099s for 2019.