Once again, it’s time to be sure you’ve issued 1099’s appropriately. If you have a business or rental properties and have hired contractors or businesses, you may be required to issue 1099’s letting the IRS know who you paid. There are 21 different 1099’s, depending on the situation. Most of us will be issuing 2 main 1099’s: 1099-NEC or 1099 MISC.
There are 3 copies when you issue 1099’s: one for your records, one gets sent to the IRS, and one gets sent to the vendor, individual, or company you paid. These 1099’s are due by January 31st. If you don’t issue 10f99’s appropriately, the penalty is $110 up $550. Ignorance is not a defense.
Generally, if you pay a business entity that is taxed as a C-Corp or S-Corp, you don’t need to issue a 1099. However, if you are paying a business that has “LLC” or “LTD” you’re going to have to request a W-9, which will show you how the business is being taxed. If the LLC or LTD is indicates on the W-9 form that they are being taxed as an S-Corp or C-Corp, you are not required to issue a 1099. However, if the LLC or LTD is disregarded (single member LLC/Sole Proprietor), or taxed as a partnership, you will be required to issue a 1099.
If you pay a non-employee or business using a debit card or credit card, you are not required to issue a 1099. However, if you pay using cash or check, you will need to issue 1099’s. If you use Paypal, Venmo or Cash App, and you’ve established your payment processing account as a business, you will generally not need to issue 1099’s. However, if use a personal account payment processing account, or Zelle to issue these payments, you will be required to issue 1099’s appropriately.
If you’re hiring a contractor or business that refuses to give you a W-9, you may want to think about hiring someone else. This may indicate the person is a tax cheat that you don’t want to be associated with!
Remember, you can never get penalized for issuing 1099’s inappropriately, but you can be penalized for not doing so appropriately! There are plenty of services online to assist you. Please feel free to share your favorite 1099 processing service in the comments below!
For those of you focused on protecting your assets while staying compliant, reach out to NCH for expert guidance on asset protection and LLC management. They can help streamline your processes and secure your financial future.
