NOT just for contract workers! 1099s Explained

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1099s are NOT just for Contract Workers. Business owners must send 1099s to everyone who was paid for a Business Service...

• RENT     (both office & equipment)
• Coaching/Consulting
• Accounting
• Cleaning
• Computer Repairs
• Building/Vehicle Repairs
• Attorneys/Legal fees
• Advertising/Marketing Services
• Snow Removal
• Painting
• Construction
• Professional Services
• etc, etc, any and all business services!

You must send a 1099 for these types of payments if the payment is over $600 by check, cash, ACH bank transfer, or other cash equivalent like Zelle.

The Credit Card Company (Third Party Payment Processors becomes responsible to send 1099s if the payment is over $600 and made by Credit Card/Debit Cards, Business PayPal, Business Venmo, etc

NOTE not all electronic processors work the same. If in doubt, ask the service that you use if they send 1099s. If they do not, you must do so.

EXCEPTIONS...

• Do not send 1099s to Incorporated Vendors if.... 
  

  they provide a signed W-9 stating they file taxes as a corporation; incorporated vendors are exempt from 1099s
  
  NOTE if a vendor publicly uses "Inc" in their business name only then can you safely skip requesting their W-9
  
  

• Attorneys
  ...are never exempt and must always be sent 1099s if paid over $600

What is a 1099?

A 1099 reports income to both the vendor and the IRS.
(this is why its a hot topic, turns out some vendors don't like to report their income unless forced...)

NOTE there are many different types of 1099 forms: 1099NEC is sent to service vendors, 1099MISC is sent for rents paid, 1099INT is sent for interest paid, 1099K is what credit companies send

 

What is a W-9?
A W-9 is statement that you will request from from Business service vendors; it provides the information that goes on a 1099.

(it also serves as your proof of the vendors tax status in the event the IRS comes asking) 

The only way to be 100% compliant with 1099 filing is to ask ALL new Service Vendors for a signed W-9 before you pay them. If you ask for W-9s after you've paid a Vendor, you may find it challenging to get them.

It is your problem If a Service Vendor refuses to give you a W-9. , not the vendor's.

You cannot "take someone's word for it" , imagine telling an IRS auditor     "but they said they were an S-Corp!"

See also How can I e-file 1099s on my own?
See also Singletrack's W-9 Compliance and 1099 Filing service
See also Is my worker a Contractor or an Employee?
See also Using Gusto to pay 1099 Contractors