January 31 is a special tax date for business owners to be aware of: it’s the day they need to send Forms 1099-MISC to qualifying individuals that they’ve worked with during the previous year. The definition of “qualifying” has many categories, but for most cases it’s any unincorporated, independent contractor, to whom you’ve paid $600 or more over the course of the year. (An explanation of all the different categories can be found in the IRS instructions.)
Simply handing an independent contractor a Form 1099-MISC isn’t the end of the story though — a copy of those 1099′s also have to be sent to the IRS. This is a step a lot of small business owners miss, and could get them in trouble. Not only are there penalties for failing to file, we’ve seen the IRS disallow the deduction under audit if the 1099′s were never filed, regardless of whether the payments were documented. The due date to get the IRS their copies, is the end of February if filing by paper, and the end of March if filing electronically.
Okay, so that’s the basics, but how do you actually go about preparing and filing the forms? If you’re relatively comfortable with computers and have your information ready, you can check out Intuit’s 1099 E-file Service: it lets you simply type in the required information on their website, and from there you can print copies to handout, and electronically file the forms online. Or if you’re not as comfortable with going through the process, we can prepare and file the forms for you — simply give us a call, and we can make the arrangements.
Of course, if you have any questions on who qualifies for 1099′s or others, please don’t hesitate to contact us, and we can step you through it. Whichever you decide, just don’t forget: January 31 is coming.