Avoid the trap of hefty penalties. If you hire contractors, please have them fill out W9 forms so that you have the correct information to file the 1099 Misc forms which is due January 31.
When you have paid someone $600+ for the year, you need to look at what kind of entity your vendor is. If your vendor is a corporation (a C Corp or an S Corp) you do not need to issue them a 1099. The exception to this rule is with paying attorneys. If your attorney has exceeded the threshold, they receive a 1099 whether they’re incorporated or not.
You will need to provide a 1099 to any vendor who is a:
-Sole Proprietor
-LLC (and has not taken the S Corp election)
-LLP
-PC
Once you have this list of vendors figured out (even if there are still some you’re unsure of), figure out HOW you have paid them. Did you pay your vendor via check, bank draft, debit card, PayPal, or credit card?
If you paid your vendor directly through your bank account (check, debit card, ACH) you are responsible for sending them a 1099.
If you paid your vendor through PayPal or a Credit Card, the merchant will issue them a 1099K and you won’t have to.
The penalties are as follows for returns submitted late to the IRS:
*$50 per information return you correctly file within 30 days after the due date; maximum penalty of $556,500
*$110 per information return you correctly file more than 30 days after the due date but by August 1; maximum penalty of $1,669,500
*$270 per information return if you file after August 1 or you do not file required information returns; maximum penalty of $3,339,000
*$550 or more per information return if any failure to file a correct information return is due to intentional disregard; there is no maximum penalty
In addition, the same penalties above are assessed at the same amounts on a failure to provide a correct 1099 statement to the vendor or independent contractor. The penalty for not filing a correct information return with the IRS is separate from the penalty for not providing a 1099 statement to your vendor.
