The big date to keep in mind for complying with an important IRS requirement is coming up: February 28, 2013. That’s the deadline for filing your 1099 forms with the IRS. Penalties apply if you file after that date. So now you know.
Right about now you might be wondering, “What the heck are 1099s and do they apply to me?”
1099s are forms that you, the business owner, fill out and send to the vendor and the IRS reporting each vendor’s tax info and the total amount you paid them in 2012.
It used to be that businesses were required to report to the IRS all payments of $600 and over to vendors who were not incorporated or taxed like corporations (more below on how to determine this little factoid about their tax status.)
That all changed effective with tax year 2011.
Now you, the business owner, are only required to file 1099s on vendors that meet ALL THREE of the following criteria:
- Paid $600 or more in the calendar year
- Paid a vendor who is not a corporation or taxed like one.
Another way of looking at this is that you don’t have to report any payments you made to vendors via credit card, debit card, gift card, or PayPal, no matter how much you paid them or what tax status they hold. That’s because your credit card company, your bank, and PayPal will file their own 1099s with the government. So helpful, nay?
How do you know what your vendors’ tax status is? How do you know if they aren’t a corporation or taxed like one?
There are a couple of really quick ways to know:
- If your vendor has “Inc.” as part of their name, then you know that they are a corporation and you are NOT required to fill out a 1099.
- If you made payment to a vendor using their personal name, then they are sole proprietor and DEFINITELY need to get a 1099 from you.
If neither of these two applies then you have to ask them what their status is. You do this by sending them a request to fill out a W-9 form. When they send it back to you, you’ll know. Here’s where you get the most current form online from the IRS: form W-9. Don’t be put off by the date of December 2011 on the form; it is the most current…really.
So to recap: if you paid more than $600 via cash or check to any vendor NOT a corporation or taxed like a corporation, then you need to file a 1099.
Now the deadline of January 31, 2013 to send all your 1099s out to your vendors has come and gone; but not to worry. You still have time to complete your 1099s, send them to your vendors and meet the hard deadline of February 28, 2013 to send the report to the IRS. This is the important deadline that has consequences if you are late.
What if a vendor doesn’t send a completed form back to you?
The best way to insure that this doesn’t happen is to make receipt of a completed form a REQUIREMENT before they get paid. It’s amazing how much of an incentive that is. If they blow you off after you’ve requested the info, then send them a letter via certified mail to record that you did your due diligence and that you sent it.
Why jump through those hoops and go to the expense?
I have one word for you: penalties.
So here’re the steps to follow to get ‘er done!
- Download form W-9.
- Email the form to all your vendors that you paid $600 or more in calendar year 20112 and ask them to fill it out and return it to you.
- Mail the 1099s to the IRS by February 28, 2013. (If you file electronically, you have until April 1, 2013 to file. No foolin’!)
Have some further questions? Please shoot me a query in the comment section and I’ll be happy to answer.