As the year winds down, do yourself a favor and start preparing for next year’s tax season! One easy thing you can do is to make sure you’re ready to complete those 1099s. Form 1099-MISC is something the IRS requires for rental owners and vendors who received over $600 from you during the year. If your business utilizes independent contractors, this is the form you will give them for taxes. We’ve already talked about independent contractors in a previous post and this is the form you give them to report their ‘wages’ from you.
Review your vendors who will receive Form 1099 and make sure you have a W-9 completed for each one! This is important because you need the tax ID number on it, either the individual’s SSN or the business EIN. It’s good practice to obtain a new W-9 each year for vendors and keep them on file.
Make sure your books are up to date. This includes all bank and credit card reconciliations. Then review how much each vendor received and make sure the number is around where you thought it would be. If not, do some investigating! Review your invoices received from the vendor and make sure they do not have outstanding invoices for you.
Once you are comfortable that the numbers to be reported are accurate, you will need to complete the form. Depending on how many you have, you may have your software do this for you or complete them online individually. You will need a Form 1096 that is the total of all 1099s. Check this total with the total of all the 1099s. You will then need to print and distribute forms. Copy A is for the IRS, Copy 1 is for the state tax departments, Copy B is for the recipient, Copy 2 is for the recipient to file with their state, Copy C is for you, the payee. Once all of the 1099s are completed, fill out a 1096 which basically summarizes all the information from the 1099s. This will be submitted to the IRS.
If you’re confused about who receives a 1099, remember it’s anyone you paid over $600 to during the year. Be sure to visit the IRS website if needed https://www.irs.gov/uac/about-form-1099misc and contact your CPA or tax advisor if you have additional questions. There are some general exceptions and then some exceptions to the exceptions. If you have any questions seek professional advice, this is not something you want to take your best guess on!
As 2016 comes to an end, I hope you are enjoying this season and maybe using it to be a little productive for the busy tax season ahead!
Happy Holidays and New Year from Ilderton Bookkeeping, LLC!
Jordan Ilderton, CPA