1099 Compliance 101: What Every Small Business Owner Needs to Know -

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1099 Compliance 101: What Every Small Business Owner Needs to Know

January 19, 2025

Introduction

1099 forms are crucial for reporting contractor payments to the IRS. Mismanaging them can lead to fines. Here’s how to handle 1099s efficiently.

What is a 1099 Form?

It’s used to report payments to non-employees who earned $600 or more. Common recipients include freelancers, consultants, and independent contractors.

Steps to Manage 1099 Forms

Collect W-9 Forms: Request these from contractors before payment.

Track Payments: Use bookkeeping software to log contractor expenses.

Issue 1099s on Time: Forms must be sent by January 31.

Consequences of Non-Compliance

Failing to issue or file 1099s can result in fines and penalties.

Best practice.

To avoid stressing out chasing completed and signed W9 from your vendors/sub-contractors to comply with the 1099 reporting, it is a good business practice to obtain their W9 as a requisite for payment, if you think you will pay them $600 or more during the year.

Conclusion

Being proactive with managing compliance to the 1099 reporting is a good business practice and provides you peace of mind to stay away from the IRS radar.