January is a busy month for small businesses - it's housekeeping time! And, it's time to prepare and file Forms 1099 for vendors and subcontractors.
Vendors and subcontractors that you pay $600 or more in a calendar year must receive a Form 1099. There are two exemptions - payments to corporations and payments made by credit card.
The starting point is to obtain a completed Form W-9 from the vendor or subcontractor. This form collects the necessary information to prepare the Forms 1099. A writeable pdf copy of this form is available at the IRS website - https://www.irs.gov/pub/irs-pdf/fw9.pdf.
Steep penalties are imposed for failure to timely file Forms 1099. The penalty depends upon the business situation and the delay in filing, but can be as high as $530 per vendor. In addition, when filing your annual income tax return for the business, the business owner is required to note if they filed all required Forms 1099. Failure to respond to this question correctly is a red flag issue for the IRS.
Filing Forms 1099 is one of the regulatory burdens imposed upon small businesses, but it is a process that is here to stay. Call our office today if you need assistance!