Avoid these 1099 mistakes before year end
January of every new year comes with 1099 mistakes which many small business owners forget about. As our customer, we don’t want you to be caught off-guard.
What To Know About W2s and 1099s?
You must send your W2s and 1099s to any non-employee or independent contractor that earns more than $600 in any calendar year. By law, you need to send a 1099 to your independent contractors by January 31. In years gone by, small business owners used to have about 30 days to submit their W2 and 1099 information to the IRS. However, beginning in 2017, the luxury time between January 31 and February 28 no longer exists. Small business owners must now send their documentation to independent contractors as well as submit their W2 and 1099 information to the IRS by January 31. That makes January a crazy month! Can you see how easily January can morph into a heap of 1099 mistakes?
3 Tips to Avoid 1099 Mistakes
For future reference, here are 3 tips to avoid 1099 mistakes:
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Use independent contractors that operate as corporations.
Your business does not have to report 1099 payments made to corporations, S corporations, and LLCs that elect corporate status for federal tax purposes. However, you’ll only know this information from the W9 tax form. It’s one less item on your January to-do list.
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Make payments to independent contractors using a third-party payment system.
Third-party payment systems, like Paypal, do the work for you. They produce 1099-K form to contractors from payments during the year. It makes your job so much easier at year end.
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Always get a W9 upfront before making your first payment.
By enforcing this rule, you will know long before due dates if your independent contractor comes with a filing requirement. On the w9, they must disclose the business type to you. Also, the W9 will tell you if the LLC files as a corporation for federal tax purposes. Most importantly, though, you won’t need to chase down the independent contractor for the information you need without having sufficient leverage.
W2s and 1099 mistakes can be stressful for small business owners who are unfamiliar with IRS changes for 1099s. Therefore, partner with Paragon and use our W2 and 1099 preparation service to save you headaches, stress and costly penalties.