Staying on top of 1099’s

Staying on top of 1099’s

Another January has come and gone, and for us accountants, that means the headache of 1099’s is behind us for another year. The best way to avoid those January woes is to stay on top of collecting W-9’s throughout the year. Here’s a brief rundown of who you need to collect a W-9 from and then who you need to send a 1099.

 

Who should I collect a W-9 from?

It is a good practice to collect a W-9 from all new vendors. However, you won’t need to issue 1099’s to corporations (unless they provide legal or medical services), so you really only need to collect a W-9 from individuals, partnerships, LLC’s and all legal and medical practices.

 

Who should I send a 1099 to?

A 1099 must be sent to all eligible recipients when over $600 payments are made in the calendar year. The 1099 amount is determined by payments made, not by the amount that has been invoiced. Take a look at a W-9. Here’s a quick rundown of how the federal tax classification determines if the vendor should receive a 1099:

  • Individual/sole proprietor – A 1099 must always be issued if the payments were for services. Notable exceptions include expense and mileage reimbursements/advances and benevolence.
  • C Corporation – Unless the vendor provides legal or medical services, a 1099 does not need to be issued to C corporations.
  • S Corporation – Unless the vendor provides legal or medical services, a 1099 does not need to be issued to S corporations.
  • Partnership – A 1099 must always be issued to partnerships.
  • Trust/estate – A 1099 must always be issued to trusts and estates.
  • Limited liability company – If the LLC doesn’t identify their tax classification, go ahead and issue them a 1099.
    • C – LLC’s that have elected to be taxed as C corporations do not need to be issued a 1099 unless the vendor provides legal or medical services.
    • S – LLC’s that have elected to be taxed as S corporations do not need to be issued a 1099 unless the vendor provides legal or medical services.
    • P – LLC’s that have elected to be taxed as partnerships must always be issued a 1099.


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