The Time is Here – Form 1099

Attention business owners! It is almost time to file your 1099’s for certain payments you made during the 2019 tax year.

Who needs to file Form 1099? Any business that pays a non-employee individual $600 or more for their services must file. On a separate note, your employees are issued a Form W-2 which is totally separate from and not related to Form 1099. Under certain circumstances, your business will issue both a W-2 and 1099 to your employee.

What information is included on the form? Quite a bit. The first section contains information about your business including name, tax id number, and address. The second section includes information about the individual receiving the form including their name, address and tax id number. The third section includes details about the payments that were made throughout the year to the individual.

What’s the big deal if you don’t file them correctly and on time? How about a maximum penalty of $1,113,000 if you are a small business (average annual gross receipts of $5,000,000 or less). The penalties increase if your receipts exceed this threshold. It is very important to have accurate information in a timely manner or else the penalties can be staggering.

When are they due?  January 31st if you are reporting Non-Employee Compensation in Box 7, so we need to get to work on them immediately.

What is Non-Employee Compensation? Generally speaking, it’s a payment of $600 or more made to an individual who is not your employee for services they provide in the normal course of your business.

Do 1099’s have to be e-filed? It depends. If you are issuing more than 250 then you must e-file, however, the IRS encourages everyone to e-file regardless of the number.

Joe Wright CPA PLLC provides the information in this blog as a general guide. Tax laws are extremely complex, and every taxpayer is unique. Some or all of this information may or may not apply to you. We provide simplified situations to clarify some of the major aspects and highlights of the topic at hand. Some of the language used is casual and may be misconstrued. Please make an appointment with us soon to discuss your particular circumstances.