Are you ready for some important and quick tips for 1099s? Let’s jump right in.
Businesses that hire independent contractors should be familiar with the 1099-MISC which is sent out to contractors to use for their tax-filing purposes. 1099 forms are only sent to sole proprietorships and partnerships. You do not need to send a 1099 to a corporation, EXCEPT medical corporations and law firms.
What is so important about 1099s?
They are “whistle blowers”. Their sole purpose is to let the IRS know how much you paid someone, and vice versa. Be sure to gather and review the 1099’s that you receive and make sure the amounts are not higher that you actually received.
As a business owner, one of the most important things you should know about 1099s is that you should not wait for them to arrive. 1099s are not relevant to your business income. When you are in business it is your responsibility to do your own bookkeeping; you shouldn’t wait for the 1099s to reach your mailbox before you start getting your books in order. You need to account for all the money you receive throughout the year.
Still confused about a 1099? As stated above a 1099 is an Internal Revenue Service form that is used to report income received through sources other than employment.
A 1099 tax form is a record that an entity or person (someone other than your employer) gave or paid you money. Even if you receive a 1099 tax form doesn’t always mean you owe taxes on that money. You might have deductions that may offset the income. It’s important to speak to your bookkeeper about this and any other questions you may have. But also, know that the IRS knows about it.
Looking for money information or tips? Check out our post on Where did all my cash go?