What is a 1099-MISC and do I need to file one?!
It's that time of year again!
Tax season.
This month there's an important form you must send out to those who've worked for you throughout 2017. It's called the 1099-MISC form.
The 1099-MISC can be one of the most confusing things known to business owners. Especially those in the online world. Even within the financial community because there's all sorts of "if this then that's" going on in one form.
Let's not forget that they're due on January 31st.
Per the IRS, the 1099-MISC determines how much self-employed individuals get paid. Once we understand the pertinent information (or collect it ahead of time) the form isn't so bad!
You have to look and see where you've paid someone. And it gets really scary if you come or do pass a deadline of January 31st but it doesn't have to be so scary.
Just as a note, for the duration of this post, I'll be sharing how to navigate a 1099 form in relation to small businesses. Mostly meaning we're worrying about box 7!
Please refer to the IRS for further instructions! Don't take this post as an end-all be-all for 1099s. If you'd like to work with us to file your 1099s, click here.
The 1099-MISC form signifies how much you pay your contractors on this form is important. Your contractors are in charge of paying their own taxes. The form helps the IRS know who is getting coins and from where!
You also want to be careful about who you actually label as a contractor instead of a W2 employee.
That's a discussion for another day...
Who actually gets a 1099-MISC form?!
Sole proprietors, partnerships (LLLPs) and LLCs you pay $600 or more via cash or ACH aka bank transfer.
These people can be the following:
- Virtual Assistant
- Affiliates you payout
- Copywriters
- Coaches or consultants
- Attorneys (Even if they're an incorporated. Double check with your attorney!)
- Bookkeepers
- Accountants
- And anyone else in between!
***Quick tip that even I got stumped on: When you write the check is when you paid the contractor. NOT when it actually clears!
Who does NOT get a 1099-MISC form?
If someone is an S-Corp or C-Corp. This means that this type of business is actually incorporated (unless they're an attorney).
Your team members who live outside of the US. These individuals should get a W-8BEN form.
Those who you've paid via PayPal, credit/debit card, or payment processor. This means if someone sends you an invoice and you pay through the invoice, you paid through a processor. These companies are supposed to send your contractors a 1099-K at the end of the year.
how and where do I file them?!
I'm all about digitizing everything to make life easier and avoiding postage.
I love both software tax1099 and track1099. They allow you to quickly file directly with the IRS and deliver the forms to your team without the hassle.
The best thing about the software is that it works with both Xero (my fave accounting software) and QBO.
A detailed bookkeeping system with your W9 form will delete deplete the guessing!
If you don't have an a cloud-based accounting system, we need to talk! Check out our Start Me Up program to get those coins in order!
How do I avoid getting confused next time around?!
Obtain a W9 form your contractors or vendors at the beginning of your relationship! This form allows you to get your team's correct Legal Name, Tax ID number, and address. Get one from your team members every year because... people do move OR change their business names.
Choose one way to pay them. This will take out the guessing if you paid someone with a check then PayPal then cash... you get where I'm going with this...
If things do come up and you have to pay another route, document the way you paid them. Then by the next 1099-MISC season, there's no scowling your bank statements! Or bugging your contractors.
Have a bookkeeping software (or hire us) to easily track said payments! Nothing like having everything done throughout the year and all you have to do is pull up a software next Jan.
Let us help you!
Take the quiz below to see how many actual 1099-MISC you have to file!