A brief primer on the 1099-MISC to help you make sure you've dotted all your i's and crossed all your t's in time for this year's tax season.
As a small business owner, figuring out who gets a Form 1099 and why can be frustrating and confusing. And keeping up on the changes (which have been known to come out after the deadline for sending them has passed) is exasperating enough to make you consider giving up altogether.
Unfortunately, throwing in the towel is one thing you really shouldn't do. The fines and penalties for not complying with IRS regulations on 1099s can bury you. Late filing penalties run from $30 to $100 per form depending on how long you wait. If you don't send them at all the penalty is $250 per statement and there is no maximum.
WHO GETS ONE?
In general, you have to issue a Form 1099-MISC to each and every supplier, vendor, contractor or freelancer you have paid $600 or more in rents, services, prizes and awards, or other income payments. That includes your lawyer, property managers and probably your landlord.
HOW DO YOU DO IT?
You can do it the old-fashioned way and pick up IRS pre-printed forms (in triplicate), fill them out by hand and mail them. Or you can use one of the many software apps or online services that allow you to fill out, save, print and electronically file your 1099s. The second option costs a little more, but I think it's well worth it in both time and effort.
WHEN DO YOU HAVE TO DO THEM?
I recommend now! The deadline for sending your forms varies depending on who is receiving them and how they're being sent.
▻ Form 1099s you send to your vendors, contractors, lawyers, etc. must be postmarked or emailed by midnight on January 31.
▻ If you're mailing 1099s to the IRS along with the Form 1096 transmittal form, you have to send them before the end of February. This year, being a leap year, gives you one extra day.
▻ If you're filing electonically you've bought yourself an extra month to double check for errors or deal with disputes from vendors. Filing deadline is March 31st.
NEED MORE INFORMATION?
For more details and instructions regarding IRS Form 1099, see the Instructions for Form 1099-MISC from the IRS website.
And, if you're still feeling lost -- call an accountant!