Preparing for 1099 Season
Preparing for the 1099 season involves several key steps, especially if you are a freelancer, independent contractor, or business owner who pays contractors.
Here's a general guide to help you get ready for the 1099 season:
Review Contracts and Agreements
Ensure you have accurate and up-to-date information for each contractor you worked with during the tax year.
Confirm that you have the correct legal name, address, and tax identification number (TIN) for each contractor.
Classify Workers Correctly
Make sure you have correctly classified your workers as employees or independent contractors. Misclassification can lead to tax and legal issues.
Gather Information
Collect W-9 Forms: Request W-9 forms from all your contractors. This form provides you with the necessary information, including the contractor's legal name, address, and TIN.
Verify Information: Confirm that the information on the W-9 forms matches your records.
Update Vendor Records
Update your accounting and vendor records with the information gathered from the W-9 forms.
Track Payments
Maintain accurate records of payments made to each contractor throughout the year. This includes any additional compensation, reimbursements, or benefits provided.
Verify Thresholds
Understand the IRS reporting thresholds. Generally, you are required to issue a 1099-NEC form for payments of $600 or more for services performed by an individual or business.
Order 1099 Forms
Order the necessary 1099 forms. For non-employee compensation, use Form 1099-NEC.
Prepare 1099 Forms
Use accounting software or work with us to help you prepare and issue 1099 forms to your contractors. Ensure that you have the correct amounts and information on each form.
File with the IRS
File Copy A of each 1099 form with the IRS by the deadline. This can usually be done electronically through the IRS FIRE (Filing Information Returns Electronically) system.
Provide Copies to Contractors
Furnish Copy B of the 1099 forms to each contractor by the deadline (January 31). This can be done electronically or by mail.
Keep Records
Retain copies of all 1099 forms, as well as the associated W-9 forms, for your records. This documentation may be needed in case of an audit.
Stay Informed
Stay informed about any changes to tax laws and reporting requirements. The tax landscape can change, so it's essential to be aware of any updates.
If you're unsure about any aspect of preparing for the 1099 season, we are here to help! CPA by Choice is continuously monitoring updates from the IRS to ensure that our clients are up-to-date and compliant. Please call us/message us if you need our assistance and allow us to take care of your accounting, we want to help your business remain compliant with the changes in 1099s and anything the accounting world in 2024 may bring.