Don't Forget Your 1099s
Be Sure To Include All Your Contractors In Your Filing, Otherwise You Could Incur A Penalty.
Now that the holidays are behind us, it’s time to get back to work! And what better way to kick off the new business year...than with a tax deadline. In case you forgot, you have to do something very important by January 31: Prepare and send out your 1099s.
I can hear the groans already. But it must be done! A 1099 is a vital piece of the tax puzzle.
Similar to a W-2 for an employee, a 1099 tells an independent contractor the amount of money that they made from you during the year (minus any withholdings you made).
An independent contractor will then provide this information to their tax preparer, so their income tax return can be prepared properly. Hence why it’s so important to get accurate information onto the 1099 - your contractor’s tax fate is depending on it!
But not all contractors receive 1099s.
The IRS has set out some specific criteria that outlines who receives a 1099 and who is exempt from the filing. There are MANY articles written on this criteria, so I’ll spare you the details for now and invite you to search for one of those.
Now, here’s where it gets even trickier. When we think of an “independent contractor,” we think of an individual person (i.e. a consultant) that we have hired to do a specific job for us. We don’t often think of a company as a “contractor.”
But for 1099 purposes, any company or person that you pay may be eligible for a 1099.
So it’s very important that you apply the IRS criteria to ALL the people and businesses you paid last year.
It’s vitally important that your 1099 filings be done accurately, comprehensively, and timely. Failure in any one of these areas could result in a penalty! If you’re not sure about how to do this correctly - or just don’t want to waste your time on it - then contact us. CFO Services Group has been helping clients with 1099 filings for over 10 years and would be happy to assist you..