If you missed my post a couple of weeks ago about the 1099 deadline, or if you simply fell behind and didn't get all your 1099-MISCs out the door to your vendors by the January 31st deadline, don't despair. The world is still turning and life is going to go on. It's not the end of the world, and you can still get yourself in compliance relatively easily. Doing nothing because you think it's too late is not a good option, though. That can get you into trouble with the IRS.
Your Best Option for Getting Your 1099s Done Quickly
If you are in fact late on your 1099s, you may be like thousands of other business owners who just have too many things going on and find it hard to keep up with all the administrative hassles of running a business. So why not remove as many obstacles to getting this done as you can? I would highly recommend e-filing your 1099s. There are many online sites that provide this service. Just google "e-file 1099s" and you'll find plenty. We suggest www.tax1099.com, but there are many others.
E-filing your 1099s takes away the hassles of buying paper 1099 forms, figuring out how to get them to print on your printer, stuffing envelopes, and mailing them. It also lets you avoid having to file the related Form 1096 with the 1099 IRS copies by February 28th. You just file them once on-line and you're done. The cost of filing 1099s on-line ranges from about $.56 to $3.50 per form, depending on your volume and whether or not you need the service provider to send out paper forms to some of your vendors. What is your time worth, and what is the opportunity cost of spending time working on 1099s? The math adds up quickly.
Which Vendors Do You Need to Send a 1099-MISC?
You still need to identify which vendors need to receive a 1099-MISC, even if you go the on-line route. Here is a step-by-step approach:
- Go through your vendor list and find all vendors you paid $600 or more during 2020. Print this list.
- Take a highlighter and highlight all the vendors on that list that you paid for services (i.e., not products or goods).
- Now take a pen and review the vendors you just highlighted, circling the ones you know are sole proprietors, partnerships (including LLCs), and attorneys or law firms. Corporations don't get 1099s, so you don't need to circle ones that end in "Inc.", "Incorporated", or "Corporation".
The vendors you highlighted and circled are the ones you need to send a 1099-MISC. Now you have your list, and you know how many 1099s you are dealing with.
What Information Is Needed for the 1099-MISC?
The next step is to make sure you have all the information you need in order to send them a 1099. Here is what you will need to have handy:
- Vendor name
- Current address
- Vendor's tax identification number. If the vendor is an individual, this will be their social security number (SSN) or individual taxpayer identification number (ITIN). If the vendor is a business, this will usually be their employer identification number (EIN).
- E-mail address for receipt of electronic 1099s (if you go that route).
- How much you paid the vendor during 2020.
Now here is some good news: if you don't know the vendor's tax identification number, the on-line services will generally try to find it and fill it in for you. In addition, if you use an online filing service provider and you don't have an email address for some of your vendors, the service provider can mail paper copies to the vendors for an additional fee.
Get More Information From the IRS
The information above is a simplified version of the 1099 process and requirements. You should read the IRS instructions for Form-MISC to make sure none of the other special situations apply to you.
What If I Just Can't Be Bothered to Do My 1099s?
If you are just too busy to get your 1099s out the door, or you would rather poke yourself in the eye with a sharp stick, AcctTwo can help. We would be glad to take on the entire 1099 process for you and perform all the steps above. Just fill out our contact form and we will be in touch with you quickly.
If you're a Sage Intacct customer or you'd like to see how 1099s are handled with that product, take a look at these video guides from one of AcctTwo's Solution Architects: https://info.accttwo.com/sage-intacct-1099-videos.