1099 Reporting Requirements: 1099 Due Date Approaching Quickly!

It's the start of tax season and the 1099 deadline is coming up very quickly. Form 1099-MISC is due on January 31^st of each year. This year, however, January 31 falls on a Sunday, so the due date is February 1st instead.

If you are required to report 1099 income to independent contractors, you have until February 1 to provide 1099s to your workers, and you have until March 1 to provide copies to the IRS.

IRS Form 1099-MISC is used to report various types of income, such as rent, royalties, and non-employee compensation. It is the form used to report income earned by independent contractors and self employed people.

You may be required to file a Form 1099-MISC if you pay someone for rent, services or other fees in the course of your business.

Generally, if you pay someone $600 or more for services performed in your business and that person is not your employee, you need to issue a 1099-MISC form for that person. Some examples of when you may need to file a Form 1099:

• You hire an eBay assistant to help you list items on eBay and pay that person $1,200 through the course of the year
• You hire a virtual assistant to help you with administrative and customer service tasks, and pay her $600 throughout the year.
• You pay an attorney to help setup your business

When completing 1099s, you will need the recipient’s name, address and either their social security number (SSN) or employer identification number (EIN). A sole proprietor or a single member LLC (that is unincorporated) is not required to have an EIN unless they have employees or a Keogh retirement plan, so you will use their SSN in place of an EIN when completing 1099s for these recipients.

To get the required information, it is recommended that you request the recipient complete a Form W-9, Request for Taxpayer Identification Number and Certification.

Note: the IRS may penalize you for not getting the recipients SSN or EIN, unless you can show reasonable cause for not getting it. Even if you can show reasonable cause for not providing the SSN or EIN, you must get this information before you file another 1099 for this person.

You have several options when it comes to filing your 1099 forms:

1. You can buy the forms at an office supply store and type or print them on your computer.  
2. You can use a tax filing website to complete the forms for you, usually for a per-form fee.  The site I use for W-2s and 1099s is FileTaxes.com
3. You can prepare 1099s directly from some small business accounting software programs, such as QuickBooks Pro 2010.
   

Sometimes you are unable to get an address or tax ID number for someone who you are required to file a 1099 for. Since the IRS imposes penalties on incomplete 1099s (as well as penalties for filing late or failing to file a required 1099), it’s important to get the correct information for each recipient.

A good practice is to require each person who may need a form 1099 to complete a form W-9 before they can receive payment for the services performed. If you can’t get the missing information even after several attempts you should still file the Form 1099.

The IRS will waive the penalty if you can show reasonable cause for not having the required information. However, even if the IRS waives the penalty, you should obtain the missing information before issuing another 1099 (in the following year).

Again, by requesting the recipient complete a Form W-9 before they can be paid, you’re more likely to have the needed information when it’s time to report their income at the end of the year.