3 things to do now to make issue 1099s easier in January
In just a few months, by the end of January, business owners will have to issue 1099s to the vendors they paid during the year.
Waiting until January to start is a big mistake. You’ll scramble to get W-9s from our vendors and run up against the deadline. At my accounting firm, we’ve been helping clients collect W-9s throughout the year.
To make issuing 1099s stress-free, you must focus on collecting W-9s now.
What are W-9s?
Form W-9 has your vendor’s tax information. You’ll need this to report the amounts you’ve paid them to the Internal Revenue Service. Your vendor should give you their W-9.
Here’s what you should do now to make your life a lot easier later.
#1 - Figure out who you’ve paid this year
Start by figuring out who you’ve paid this year.
Most accounting systems will let you a report that shows this information. Take the list of vendors you’ve paid and determine if you have a W-9 for them. If you do, great! One less W-9 to track down.
#2 - Collect W-9s now
For vendors without W-9, contact the vendor and request it.
A better strategy is to not pay the vendor until they provide you with a W-9. They shouldn’t complain because they are required to provide this to you. Here’s proof straight from the W-9 instructions.
From Instructions to Form 1099
From Form W-9
#3 - Enter the W-9 into your accounting system
Take all the W-9s you’ve collected and enter them into your accounting system.
Quickbooks Online and Xero let you check a box to indicate that a vendor should receive a 1099. Using this information. The accounting system will calculate the amount to report on the 1099 for vendors who qualify for 1099s.
## How do you determine if a vendor should get a 1099?
Here’s a simple rule to follow, and you’ll be right most of the time. If the vendor checks one of the following boxes, they should get 1099 if you’ve paid them $600 or more during the year:
Individual/sole proprietor
Partnership
LLC treated as a partnership
Corporations (S and C corps) are exempt from receiving a 1099. Of course, there are exceptions, but this rule will cover most situations.
Takeaways
- Start collecting W-9s so you have an earlier and stress-free time to issue 1099s in January.
- W-9s will let you know which vendors should receive a 1099.
- Your accounting system will report for you if you do leg work now.