Hayley Tumanjan of Tumanjan & Co. is our go-to girl for all information about accounting. As January draws to a close, Hayley has some very important information about 1099s. In her article she’ll cover what you need to do to comply with the IRS, what types of individuals require a 1099, and more. Take note: these are due February 1st, so don’t delay in getting any applicable ones completed!
What You Need to Know About 1099s
By Hayley Tumanjan
The IRS has gotten particularly detailed and drawn a hard line for collecting information on cash flows. They want to see what is going out of your business, and who you are paying. In general, it helps them track down what may otherwise be unreported income.
You likely make payments in your business daily. Many of these payments create a reporting requirement for you, on form 1099-MISC, which you may already be familiar with.
The easy fix:
- Add all payments made in the normal course of your business to any party that is not incorporated, sort them by payee. This may be your rent payments, product photographers, videographers, virtual assistants, graphic designers, accountants, lawyers, and more. It tends to be the contractors and service personnel in your business that are not your employees.
- For all parties that you paid a total of $600 or more during 2015, you must issue a 1099-MISC.
- Very important: If any of the aforementioned amounts were paid through PayPal or a similar service, those amounts may be excluded from the 1099-MISC because the service (PayPal) is responsible for reporting any payments made in your business of $600 or more to one party. Be sure to check the FAQ of your payment services website or call to make sure they are responsible for reporting your payments, and to be sure you’ve covered any and all payments between the payment service and any payments you made in another way. This type of reporting on their part would require them to know you are business, so have your accountant review all to be sure you’re covered.
- Remember that this form needs to both be e-filed with the IRS, and a paper/pdf copy must be provided to the payee (or the contractor/freelancer you hired)
- The due date for providing this to the payee is February 1, 2016.
- An easy service to use is http://payroll.intuit.com/additional-services/1099/efile-1099/
To read up on the IRS requirements, dig deeper here: https://www.irs.gov/instructions/i1099msc/ar02.html
As always, tax and professional advice is always better when tailored to your situation, please make sure you’ve consulted with your CPA. We would love to be that resource for you, and love getting calls from TSBC Alums. Feel free to reach out to us.
Thanks for sharing this super helpful information, Hayley!