Year-end filing of 1099-MISC
by Russell Barker
You might think 1099-MISC filing is a year-end job and does not need attention before that. That couldn’t be farther from the truth. You should always gather W-9 forms from applicable vendors whom you have paid year round. A W-9 form is an IRS form in which the vendor provides name, address and tax identification number. This number can either be a social security number or Taxpayor Identification Number (“TIN”).
Generally, a 1099-MISC should be filed if the vendor is unincorporated AND amounts paid are:
- at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest
- at least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish, or, generally, the cash paid from a notional principal contract to an individual, partnership, or estate
- any fishing boat proceeds
- gross proceeds of $600, or more paid to an attorney during the year, or
- withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.
The reason to start gathering this information is because at year end, you may not have contact with a vendor or cannot reach them.
What are the ramifications if you do not get this information and you should have? The expense that you are trying to claim may not be valid and you might not have a credit on your books for the expense. In some cases, this can cause an increase to your net income and more taxes you will have to pay at year end.
The old saying of an ounce of prevention is worth a pound of cure. By obtaining and filing all W-9 forms, you will avoid a lot of unnecessary stress at year end. Langdon & Company LLP has a team of accounting service professional who are available to help with any of your Form 1099 questions. Please contact our office for more information.
Russel Barker ([email protected]) is a Quickbooks ProAdvisor in our Accounting Services Department. He works primarily with physician’s practices and other small businesses.