Friday 14 June 2024

6 Things Small Businesses Should Know About 1099 Forms

6 Things Small Businesses Should Know About 1099 Forms

It’s that time of the year again, when your mailbox gets filled with 1099 Forms from banks and other vendors. And as a business owner, apart from filing all the 1099 forms issued to you to the IRS, you also have to issue 1099 forms to your vendors. All in All, it’s a frustrating time for individuals and business owners alike.

So, here are 5 things you should know about these forms to make the frustrating process of 1099 reporting requirements less frustrating for your small business –

1.Which 1099 form do I use?

In total there are 17 different 1099 forms used to report different kinds of income to the IRS. For small business owners, the most important 1099 form to know of is 1099-MISC form which is used to report the payments made to contractors and independent service providers. However, its also important to gain knowledge of the remaining types of 1099 forms as well to see if you need to report them to IRS as well.

2.What kind of payments need to be reported?

Payments made to independent workers working in your firm such as web designers, writers or other workers on contract basis need to be reported to the IRS via 1099 form. Other payments such as rent for office space, payments made to unincorporated businesses, healthcare and medical expenses paid to independent workers should also be reported to the IRS.

3.What is the minimum payment I need to report?

If you’ve paid an employee or a service provider more than $600 in an year, you need to report those payments to the IRS with the help of an 1099 form. Payments lower than $600 in an year need not be reported to the IRS.

4.Are there any deadlines I should know about?

When issuing 1099 forms to vendors, the last date to do that is 31 January. When in comes to filing your 1099 forms to the IRS there are two deadlines to keep note of – 28 February, if you are filing your 1099 form on paper and 31 March, if you are filing electronically.

5.Is there any penalty if I file late?

If you fail to file your 1099 forms to the IRS before 28 February, there will be a per-form penalty levied on your 1099 forms ranging from $30-$100 per form depending on how late you decide to file. Be cautious as penalties can go up as high as $500,000.

6.Where do I get my 1099 form?

As 1099 forms are printed on a special paper, you need to order them directly from IRS, online or by stopping by at your local IRS office. Or you can get your hands on one through your accountant or get them in bulk from your local office supply store.

Use this blog as a handy go-to guide for all your 1099 form problems the next time you work overtime to file them to the IRS.