Each January we rush around to gather tax information on the independent contractors we paid in the prior year in order to send them a 1099. Here are some basic tips for making it easier and less hurried in your year-end preparations.
As a trade or business, you are required to obtain a Form W-9 from your independent contractors before you pay them, better yet – before they do any work for you. This is regardless of how much money you pay them. This form will give you the name, business name, address, entity type and taxpayer identification number.
Who Needs a 1099?
Service Providers – Anyone you pay in the course of your trade or business for services rendered. This includes Accountants, Consultants, Architects, Engineers, Designers, Contractors, Plumbers, Electricians, Installers, Landscapers, Snow Removal companies, Cleaning companies, the Auto Repair technician, Entertainers – anyone who performs a service or casual labor for your business who is not your employee.
Rents – If your business pays rent for office space or land or equipment, you are required to send the recipient a 1099 for the amount of rent you have paid them.
Exclusions – Sole proprietorships, partnerships and LLC’s that are taxed as sole proprietors and/or partnerships receive a 1099. You are not required to send 1099’s to a Corporation or a Tax Exempt entity. The Form W-9 will provide information regarding the entity type.
Threshold – Send to recipients to whom you have paid $600 or more during the calendar year.
Using the QuickBooks® 1099 Wizard
QuickBooks® has a 1099 Wizard to create accurate 1099 and 1096 forms. It allows you to review and edit your vendors, set up account mapping preferences, run a summary report to review data, and print 1099 and 1096 forms.
Note: QuickBooks® is only capable of preparing 1099-MISC. If you need to prepare other types of 1099’s (e.g. 1099-INT, 1099-DIV), you will need to do so outside of QuickBooks®.
January 31st of the following year to recipients. February 28th to the Internal Revenue Service.
Rhonda Rosand, CPA is an Advanced Certified QuickBooks® ProAdvisor and helps small business owners streamline the process of making money by setting up and cleaning up their QuickBooks® files. She is the owner of New Business Directions in North Conway and can be reached via email at firstname.lastname@example.org.
This article of QuickBooks Tips and Tricks was based on the 2012 version of QuickBooks.