Ask an Accountant in Elkhorn, WI: When Should You Send Out a 1099-MISC?

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Filing personal taxes is complicated and stressful enough without having to provide 1099 forms as a small business owner. But once you understand a few rules and procedural guidelines, it can be easy to figure out whom to send them to and how to go about it. Here’s a rundown of what 1099s are, when to send them, what the penalties and exceptions are, and much more. As your local tax accountant in Elkhorn, WI, we hope this information is helpful this tax season.

  • What are 1099 forms? 1099 forms, or 1099-MISC, are exactly what they sound like: tax forms for miscellaneous income. Often, these are sent out by businesses that paid for contract work, but the 1099-MISC can also cover income from rent, prize money and more.
  • To whom should I send 1099 forms? As a businesses owner, you should send 1099 forms to any individual, partnership, estate, LLC or limited partnership to whom you paid at least $600 last year for rent, prize money, services or labor. 1099 forms are only used by business owners, so there’s no need to send 1099s to individuals and organizations you paid personally.
  • Are there any exceptions? Yes, quite a few. You don’t need to send 1099s to real estate agents, or for merchandise, storage or other material goods. When in doubt about whether or not to send a 1099, it’s best to consult your accountant in Elkhorn, WI.
  • What happens if I don’t send out 1099s? If the IRS finds out you were supposed to send out 1099s and failed to do so, you can find yourself paying a penalty of anywhere from $30 to $100 per 1099 form. The longer you take to file after the deadline, the higher that penalty may be. If you intentionally try to avoid doing this, the penalty can be even higher, starting at $250. Sending out 1099s can be a pain, but it’s usually better than the alternative.
  • How can I make sending 1099s easier? If you like to plan ahead, one way to make tax season easier is to request W-9 forms from any individual or business whom you plan to pay $600 or more. The tax information required on W-9s will make determining whether you need to send a 1099, and filling out your portion of them, much easier.
  • Where can I find the forms? The IRS sends out preprinted 1099 forms in batches of three, and they are available at the post office or can be ordered. Act quickly in procuring your 1099s so you can be sure to get them out well before the deadline.
  • What deadlines should I know about? There are two deadlines you need to know about when it comes to 1099s. First, January 31is the date when all 1099s need to be sent out to their recipients. Second, you need to submit copies of all the 1099 forms you send out, along with a 1096 form, to the IRS. You can do that part electronically, and you must do it by March 31.

1099-MISC forms don’t have to be especially stressful or complicated for business owners to prepare and send out, but a little advance planning can go a long way. Contact your local tax accountant in Elkhorn, WI for more information.