Last minute filings for 1099-MISC forms have me inspired for our weekly post today. Last week a couple of clients called me wondering if they needed to send this form to a couple of their vendors. After a lot of back and forth, it turns out they did. This experience taught me there is a lot of confusing information available about the elusive 1099-MISC form. What is the 1099-MISC form? Who has to file? Who should be receiving one? What should you do if you receive one?
For now, the last question is easy… Last year, I shared information about the 1099-MISC from the perspective of the receiver or payee. Hop on over to that post here.
As for the other questions, let’s dig in. In short, the 1099-MISC form reports how much money a business owner (you, the payer) paid to a non-employee SERVICE provider (the payee) in connection with their business. The IRS uses the form to confirm that the payee is reporting the correct amount of income on their income tax filing.
Since we like to keep things simple here, as a business owner if you want to know if you need to send this form to your vendors and the IRS, the first question to ask yourself is “Did I pay any person or company $600 or more this year for a service?”. Did you answer yes? Then you likely need to file the forms. Another clue that you need to send the form to your vendor is if they call themselves an “independent contractor”. The 1099-MISC is only for service providers, so if you receive goods in exchange for the payment you don’t owe the payee a 1099-MISC form.
In order to figure out to which vendors you owe a 1099-MISC, have them fill out a W-9 form (I know, I know. So many forms!). In most cases if the vendor is a corporation, you need not send them a 1099-MISC. There are many detailed rules and exceptions regarding who receives a 1099-MISC, but here is the most common misconception I hear:
- “My vendor is an LLC, so I don’t need to send them anything.” Wrong! Only Limited Liability Companies (LLCs) taxed as S-Corps and C-Corps are exempt from needing a 1099-MISC from you. All other types of LLCs still require you send them a 1099-MISC.
If you think you may need to send 1099-MISC forms to vendors and the IRS, take the time to read through the IRS 1099-MISC filing instructions to be sure you get it right. Or contact an accountant to help you sift through the instructions!