The New Year is underway, and as a small business owner one of your resolutions should be to create a streamlined system for filing your taxes. Keeping your tax documents in order can feel like a challenge, but doing so will not only make tax season easier for your business, but you’ll also reduce your tax liability. Feeling overwhelmed? Call the tax prep experts at BOSS and rest assured that your documents are guaranteed for accuracy.
As a business owner, you are required to issue and submit all of your Form 1099s to your vendors by February 2nd. To help you ensure that all of your documents are in order, including collecting W-9 forms and submitting 1099 forms, we’ve created this helpful 1099 filing checklist—Questions? Contact us for assistance!
- Who receives a 1099 form?
Though specifics can vary, the IRS usually requires that freelance employees, recurring sub-contractors and any contractors paid more than $600 yearly to receive a 1099-MISC form that must be filed with the IRS. This can also include anyone to whom you have paid $600 in rents, services (including parts and materials), prizes and awards, or other income payments. You’ll send this form to any individual, partnership, Limited Liability Company, Limited Partnership or Estate.
- Collect up to date information on your contractors with W-9 forms
For filing time, make sure you have an updated W-9 tax ID form that confirms the name and address of each contractor you’ve worked with during the year. Contractors can fill these out and fax them or scan them and email them to you. The form will include their mailing information, Tax ID number, and also require that the contractor or vendor indicates if it is a corporation or not.
- Determine the compensation amount paid to each contractor
The amount paid to each contractor for the previous year can be pulled from your accounting software or business bank account tools. You’ll then fill out the contractor’s name, address and enter the amount paid according to your records. It’s important to confirm the amounts you are paying to each contractor with your accounting company to confirm that these expenses are being tracked properly.
- Enter payment amounts
For each qualifying vendor, you need to enter the amounts paid to them in the appropriate box, if applicable, for the 1099-MISC, including:
- 1 Rents
- 2 Royalties
- 3 Other Income
- 4 Fishing boat proceeds
- 6 Medical and health care
- 7 Nonemployee compensation
- 8 Substitute payments in lieu of dividends or interest
- 9 Direct sales of $5000 or more of consumer products for resale
- 10 Crop insurance proceeds
- 13 Excess golden parachute payments
- 14 Gross proceeds paid to an attorney
- Federal Income Tax Withheld
If applicable, enter any amounts of federal income tax withheld from payments to the recipient in Box 4.
- Section409A Deferrals and Income
Boxes 15a and 15b require you to record Section 409A deferrals and income, which refers to a relatively new section of the Internal Revenue Code, which has to do with non-qualified, deferred compensation plans. Check with your tax advisor if you think you may have to report non-qualified deferred compensation to someone.
- State and Local Information
Be sure to include information about state and local income and withholding where applicable. Note that you may enter information for one or two states. If you must enter information for more than two states, you will need to complete another 1099-MISC for that information.
- Check for Accuracy
It’s really worth taking extra time to make certain that the information you are providing to recipients, and to the IRS and any state taxing entity is accurate. You don’t want to get penalized for a simple incorrect entry. This is where having additional help with tax prep and filing from BOSS can be extremely useful to save you time, money and headaches, especially if you’ve waited until the last minute.
- Print and Distribute Forms
The 1099-MISC is a multi-part form. Here are the parts of the form and where you’ll need to send each part:
- Copy A is sent to the Internal Revenue Service
- Copy 1 is sent to the state tax department(s)
- Copy B is for the recipient
- Copy 2 is for the recipient to file with his/her state income tax return
- Copy C is for the payee (you).
- Form 1096 Compilation Report
Once you have completed all of your 1099-MISC forms, you must prepare and submit to the IRS a Form 1096, which totals all of the information from the 1099 forms.
Hopefully this checklist helps to alleviate some of the stress that many small business owners begin to feel around tax season. With a little extra guidance, you can help stay on top of your tax requirements and avoid penalties.
Back Office Support Solutions provides customized tax preparation and audit preparation services for small, medium and large businesses and companies, as well as a full suite of bookkeeping and accounting services. With years of experience across multiple industries, we are consistently up-to-date with current tax regulations and financial best practices. To learn more about what you need to do as a small business owner to help better manage your tax preparation or to find out how can help you, contact us today.