At SmartBooks, as at all other businesses we know, one of our least favorite activities is managing Form 1099 reporting. However, it is one of those things we must do properly to keep us and our clients out of trouble.
Recognizing 1099s rank up there with making collections calls and having teeth pulled on the list of enjoyable activities, we want to provide some encouragement to do as much of the 1099 work in advance of January as possible. At year end there are usually many other priorities such as closing the books for the year, finalizing budgets for next year, and preparing for income tax returns, all of which seem more important and at least slightly more enjoyable.
There are at least 15 different versions of Form 1099 used to report various kinds of payments made by a business. Luckily many small businesses need only file Form 1099-MISC to report payments made to service providers. Though only one version, the rules can still be complicated. With numerous exceptions and additions, the primary requirement is to report all payments made to service providers paid over $600. Corporations are generally exempt (except law firms who have no $600 exemption). LLCs, LPs, and other non-corporate entities must receive 1099s in addition to individuals working as independent contractors.
Some general suggestions:
- Collect IRS Form W-9 from all new vendors before you pay them. You need the W-9 in order to prepare accurate 1099s, and your vendors will readily provide it to you if required in order for them to be paid. Collecting W-9s months later and from inactive vendors is more difficult.
- Configure QuickBooks (or other accounting software) to identify vendors who require a 1099 for 2011. Confirm you have W-9s on file for all those vendors.
- Investigate online 1099 filing services which can save you time by mailing forms to your vendors and electronically filing them with the IRS. If you are going to write the forms by hand or print them out of QuickBooks, special paper forms must be used. Order those forms now or as soon as they are available this fall to be sure you have them when you need them.
Unless you have investigated 1099 reporting requirements and are familiar with all the federal and state rules that apply to your business, we encourage you to contact your CPA or SmartBooks for assistance. If you are inclined to self-study, click here. If you would like to discuss your 1099 requirements with SmartBooks, please contact co-founder Calvin Wilder at email@example.com or 978.202.3064 x700.
Copyright 2011 SmartBooks Corp. All Rights Reserved.