Okay, let’s break this down: If you paid an independent contractor or non-incorporated company $600 or more during the calendar year, you should issue a 1099 (When it comes to attorneys, you should issue a 1099 to them even if they are incorporated).
Your 1099 includes any payments for labor or equipment/materials if billed on the same invoice. However, if materials are billed separately, you can leave out that payment from your 1099 total.
According to the IRS, you must file and send 1099 forms to independent contractors so they, in turn, can report income from your company. If you fail to issue and file 1099s, expect to be subjected to penalties.
1099s must be filed, either electronically or via paper, by January 31, 2018. If you fail to file by this date, you can expect the following penalties:
1. A minimum penalty of $50 per return if you file correctly up to 30 days of your original due date. The maximum penalty is $536,000 per year (or $187,500 for smaller businesses).
2. A penalty of $100 per return if you file it correctly within 30 days after the first due date. The maximum penalty is $1,609,000 per year, or a minimum of $187,500 for small businesses.
3. A minimum penalty of $260 per information return should you file after August 1 or if you fail to file the information typically required on the return. The max penalty is $3,218,500 or $1,072,500 for smaller businesses.
Your accountant will need the business name or person’s name, along with their Employer Identification Number or Social Security Number, and their address to correctly fill out their 1099. This information should match their W-9. An email address is also good to have, if they have one.
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You will need to provide to your accountant the legal business name or individual name, EIN or SSN, and address as completed by the recipient on their W-9. If you have their email address, provide that we well.Your Free Year End Checklist