How to Survive 1099 Time
As soon as the excitement of the holiday season wears off, many small business owners turn their attention to taxes. If you’re an American independent contractor or small business owner, your deadlines come well before April 15, as January is time for 1099 forms.
The 1099s are Coming!
Many businesses you worked with throughout the year will start sending 1099-MISC forms during January. This is especially the case if you are a sole proprietor or have an unincorporated business.
These forms are filed with the IRS and a copy is sent to you. That means the IRS knows these companies paid you money, and you need to be sure to report these earnings on your tax return.
Be sure to keep your 1099s and provide them to your accountant or tax specialist.
Do You Need to Send 1099s?
Did you hire a graphic designer this year? Maybe you paid a law firm to handle legal work? Or you paid a web developer to create a website?
If so, you might need to send a 1099 to these people and file an informational return with the IRS. You better hurry, too; the deadline is January 31st.
The IRS spells out the guidelines for professionals who should receive 1099s in this IRS document and on the 1099-MISC form. In general, if you paid another party $600 or more during the calendar year, you need to consider adding them to your 1099 list. There are exceptions for payments to corporations, but you should ask a qualified tax professional to verify.
Here are some examples of people and companies you might need to send a 1099 to:
- A photographer that took your company photos
- The independent contractor that wrote content for your website
- The law firm you hired to file incorporation documents
- The landlord that leases office space to you
- Your IT consultant
Note: be sure you speak to a qualified tax specialist to determine exactly who should receive a 1099-MISC from you.
How to Send 1099s
Your accountant should be able to assist you with creating and sending 1099 forms as well as filing them with the IRS.
If you are a do-it-yourselfer, many small business accounting packages such as Quickbooks have a 1099 solution. Alternately, one affordable solution is Track1099.com. It helps you collect tax information from your contractors as well as e-deliver (or mail) 1099s to them.
Keep it simple
Taxes are a necessary evil of being a web professional or small business owner. It’s also an area in which a bit of prep work can save you a headache down the road.