Video – When to Issue 1099s: How small business owners get it right.

Are you part of the gig economy, using independent contractors on your small business? You need to know when and how to issue 1099s. Get your small business tax system right by watching this. And as a free bonus, get my 20-point LIFT Confidence Assessment here.

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Issuing 1099s

If you are a small business owner, sole proprietor, or entrepreneur, you probably should be hiring workers to help with your business, and issuing 1099s to at least some of them. And if so, you should have already gotten some information from them for that 1099 you will file next year. So, who should get a 1099 and what information should you be getting from them? We’ll answer those questions here.

With the rise of the “gig economy” and so many people now working as independent contractors, as opposed to full-time employees, you should be well-familiar with the rules and requirements for the tax form known as a 1099. A 1099 is designed to document and track payments you make to independent contractors for services they provide your company. If you hire independent contractors to perform services for your business, you should be aware of these basic guidelines—and reach out to us or your CPA if you have more specific questions.

First, let’s be clear about what business owners do that requires filing a 1099.

If you pay an Independent Contractor for a service provided to your company, you’ll likely need to report that payment to the IRS using a 1099. As a general rule, you must file a 1099-NEC for each individual or entity you pay for services provided to your company. (Until this year, you would have filed a 1099-MISC).

What amount triggers the 1099 filing requirement?

Ok, we know now that we need to issue 1099s for services provided to our business by independent contractors, but what amount triggers the 1099 filing requirement?

For most transactions, you’re only required to report payments of $600 or more in a single calendar year. You aren’t usually required to file a 1099 for payments under $600.

What individuals and entities qualify for getting a 1099?

In most cases, a 1099 is issued to everyone but corporations. This includes individuals, partnerships, and most business entities. For example, a 1099 is required for a limited liability company if it is taxed as an individual, but not if it is taxed as a corporation.

What information do you need to include on the 1099?

To file a 1099, you’ll need several pieces of information about your IC, such a taxpayer ID and business address. All of this information can be collected using a W-9 form.

What are the deadlines for 1099s and any 1099 related form?

The IRS requires you to send out 1099 forms to your ICs by January 31st. Then, you also have to send in the transmittal Form 1096 to the IRS before February 28. If you neglect to file 1099s at all, or file too late, you can face serious fines.

What can go wrong with outsourcing?

While outsourcing can provide your business with significant advantages, you need to pay close attention to the rules governing 1099s to avoid penalties and other complications. For example, there are several additional considerations regarding correctly classifying gig jobs and properly drafting independent contractor agreements that are equally, if not more, critical.

For trusted guidance on hiring, classifying, and paying independent contractors, freelancers, and gig workers, consult with us as your Family Business Lawyer®. We can help you maximize the benefits—and minimize the liabilities—that can come from employing ICs to help operate your business.

This video is brought to you by Greg Gordillo of The Gordillo Law Firm LLC.

Source: YouTube