The due date for 1099s is right around the corner. 1099s stress people out because the IRS has a heavy penalty if they are not filed right, which is a bummer because they can be a hassle.
The good news is: you don’t have to file a 1099 for every vendor for your business!
Don’t make small business taxes harder than they need to be. Before you file 1099s, make sure you actually have to file one first. There are some easy but little-known ways to make sure you actually have to file a 1099 for a particular vendor. Don’t waste your time filing 1099s if you don’t have to!
Here are the rules for when you don’t have to file a 1099.
Don’t file a 1099 if…
You’ve paid a vendor less than $600 total
The threshold for filing a 1099 is $600, meaning if you’ve paid a vendor under $600, you don’t have to file one for them.
Perfect – one less thing to worry about!
A vendor provided you with products (not services)
1099s are meant to account for vendors who have provided businesses with a service, not a product.
This means lawyers, cleaning services, plumbers, etc. – not vendors who sell you materials and goods for your business.
The vendor is a corporation
If your vendor is a C-Corp or an S-Corp, you don’t have to file a 1099 for them. However, if your vendor is an attorney, you always file a 1099 for them.
When it comes to LLC’s, you might not have to file a 1099. LLC’s have components of both a corporation and a partnership. Usually LLC’s are treated as a partnership, which means they need to have 1099s filed for them. However, LLC’s that are treated as a C-Corp or an S-Corp are not required to file 1099s. You can find this information on their W-9 form, in the top section on line 3. If they select “P” as their tax classification then they are required to have a 1099 issued, so it’s best to get a W-9 form from a vendor that is listed as an LLC.
You paid them with a credit card
If you paid your vendor with a credit card, the credit card company will actually be the ones who file a 1099-K on your behalf (so you don’t have to!). The vendors you do have to file a 1099 for are the ones you paid with a check or an e-check.
Once you know the vendors you do have to file a 1099 for, ask them for their W-9 forms to get the information you need to fill out the 1099 form. Then, make sure you submit your forms by the end of January – easy!
We hope this helps your tax season! We are here to help with tax planning and preparation. Contact us for more information.