1099 Reminder
Your business may have a requirement to prepare and issue IRS Form 1099.
What is IRS Form 1099 and under what circumstances would I send one?
Independent contractors use Form 1099-MISC to calculate and file their tax returns. Form 1099-MISC summarizes income from all non-employee compensation. Other 1099 forms include 1099-A, 1099-C, 1099-DIV, 1099-G, 1099-INT, 1099-OID, 1099-K, 1099-LS, 1099-PATR, 1099-R, 1099-5498, 1099-S, 1099-SB, and 3921.
Ask yourself these questions with regard to calendar year 2020:
Did you pay more than $600 to any individual, partnership (LLP), or LLC?
Did you pay any attorneys (even if a corporation)?
Did you collect / pay out rents/royalties?
Did you borrow money and pay out interest to an individual, partnership, or LLC? (1099-INT)
Were you owed a loan that was canceled / forgiven? Forgiveness of debt is income to the borrower. (1099-C)
What is the deadline for 1099s?
Businesses must send 1099-MISC to all contractors by February 1st. Companies must file those 1099s (along with Form 1096) by March 1st (March 31st if electronically).
What are the penalties for not filing or missing the deadline?
Penalties range from $30 to $100 per form if late and $250 per form if the requirement is disregarded entirely. Note: The IRS does not levy penalties for filing 1099s that are not needed. Our advice: Err on the side of caution!
What options do I have to prepare 1099s? Will Daniel Island CPAs prepare 1099s on my behalf?
Option 1:
Self Preparation - If you choose to prepare and file your 1099s yourself, DICPAs suggests that you prepare and E-file your 1099s through www.tax1099.com. This service is partnered with the IRS and is very user friendly. This service also allows for you to pay per form you file rather than one fixed price. If you opt to self prepare your 1099s please be aware of the deadlines above. *Please be advised* that if you file your 1099s by mail, you will also need to file Form 1096 with the IRS, which is a summary of all your 1099 forms.
Option 2:
Preparation by Daniel Island CPAs - If you would prefer that DICPAs prepares & files your 1099s, we will need the following information from you no later than January 25th.
Documents Required for 1099 Processing:
Form W-9 (Request for Taxpayer Identification Number). This form should be kept on file and filled out by any independent contractor whom was paid a total amount in excess for $600 for the calendar year. You should have collected these prior to issuing payment. You can download Form W9 from the IRS website. https://www.irs.gov/pub/irs-pdf/fw9.pdf
Amounts paid for each person that will be receiving a 1099 including the type of pay (compensation, attorneys fees, interest, rent, cancellation of debt, etc.)
If you have questions or concerns regarding your annual filing requirements please feel free to reach out to us.
Thank you,
Daniel Island CPAs