It’s that time of year again. Nope, I’m not talking about the fury of excitement getting the holiday lights just right so they don’t blow a breaker. It’s time to look at your vendors and determine if you are required to issue them a 1099-MISC for services rendered. Here are a few things to keep in mind when getting ready to file your 1099s.
The first is determining who gets a 1099. For this blog, I am only covering a 1099-MISC. There are other 1099s for interest, dividends, etc. The 1099-MISC is usually used to report monies you have paid to vendors that provide services for the year. These are the lawn maintenance contractor, your handyman, your plumber, your landlord, your attorney, your CPA, etc. Remember that vendors that provide services get a 1099, not those who provide merchandise, telegrams, telephone, freight, storage, and similar items.
The second challenge is to determine if the vendors you have paid meet one of the exceptions for reporting.
- The first exception is that you paid the vendor less than $600. You can run a vendor report and eliminate all of the vendors that have been paid less than $600 right off the bat.
- The second exception is if the vendor is a corporation. This can be a C-Corp or an S-Corp. If the vendor is either, you don’t need to send them a 1099. It is always a good practice to ask your vendor to submit a W-9. This will give you the vendor’s EIN and their address which will be used to issue the 1099. It will also ask if the vendor is a corporation. This form will give you what you need to file the 1099 except for the amount.
- The third exception is if you paid by credit card. If you did pay the vendor with a credit card, PayPal, etc. you do not have to issue them a 1099. They will get a 1099-K from their credit card company that will include the amount you paid.
- You don’t have to report rent paid to a real estate agent if the agent is reporting the income to their property owners. In other words, if the property management company passes the money (rent) to an owner, you don’t have to issue a 1099.
- There are several other exceptions that can be used but the above covers the exceptions that are most common.
The last item to keep in mind is the due date for issuing 1099s. All 1099s are due to your vendors by February 1, 2016. The IRS would like their copy by March 31, 2016, if you E-File, and February 29, 2016, if you don’t E-File.
This is just a summary of what you need to know to file your 1099s for 2015. Please refer to the following IRS links to learn more or contact your CPA.
- Form 1099 with due dates on the last page.
- General instructions for information returns.
- Instructions for Form 1099-MISC.