1099 Forms for Small Businesses: A Complete Guide to Who, When, and How [2024 Version]

---

It is nearly the end of the year and that means that for business owners, the 1099 season is upon us! And if you’re reading this thinking “I HAVE NO IDEA WHAT YOU”RE TALKING ABOUT” - this article is just for you. 

What is a form 1099?

In its most basic form, a 1099 is a form that lets any contractors you paid during the year know how much they made. A copy is sent to the contractor AND a copy is sent to the IRS so that the IRS can make sure that contractor reported all that income!

Who Needs a 1099 Forms? The Ultimate Checklist

Alright, let's break this down further because it's not as straightforward as you might think. A lot of people think they only need to issue these forms to individuals who they deem to be "contractors" of their business, but the IRS has a much broader scope.

Here's the real scoop on who needs to receive a 1099 (remember, as the business owner, you are ISSUING these form to those who you PAID during the year):

1. Independent contractors: If you've paid $600 or more during the tax year, BUT (and this is a big but) only for payments made via cash, check, or direct deposit. Payments made by credit card or third-party payment networks (like PayPal or Venmo if you used a business account) are reported separately on Form 1099-K by the payment processor.

2. Landlords: For rent payments of $600 or more

3. Attorneys: Payments of $600 or more, even if they're incorporated. (Yep, lawyers are special like that.)

4. Royalties: Payments of $10 or more.

Now, here's where it gets interesting:

• S Corporations: You generally don't need to send 1099s to S corporations. But how do you know if your vendor is an S corp? It's all in the W-9!

Reading and collecting a W-9

For every vendor you work with, you should collect a W9. That’s the form that contains all the info you need to know to issue the 1099 at the end of the year. When you receive a completed W-9 from a vendor, look at the "Federal Tax Classification" section. If the box next to "S Corporation" is checked, you're off the hook for sending them a 1099.

But wait, there's more:

• If the "Individual/sole proprietor or single-member LLC" box is checked, you'll need to send a 1099 (assuming they meet the $600 threshold).

• For "C Corporation," you generally don't need to send a 1099 (except for those pesky attorney fees).

• For "Partnership" or "Limited Liability Company," you'll typically need to send a 1099.

Pro tip: Always get a W-9 from new vendors before you pay them. You DON’T want to be stuck hunting them down in January with the short turnaround time.

Did you pay someone with a credit card or through services like PayPal? Good news! You don't need to send them a 1099. The payment processor will handle that with a 1099-K. 

Issuing 1099s

Once you have determined what vendors both meet the threshold & requirement, It’s now time to issue 1099s. Please note that for discussion purposes we are referring to 1099-NEC forms which are most applicable to business owners and what you would issue to contractors meeting the above criteria.

There are 2 options, efile or paper file (and you know I’m all about efficiency so I’m an efile type of girl!) 

If you choose to efile, you can efile online directly with the IRS or you can choose to use a software to help you (hint: search file 1099s on google and choose from your options!) 

If you choose to paper file, you will need to either request forms from the IRS to fill out or have a special ink to print as the IRS processors cannot read regular computer ink! 

The 1099 Process: Your Step-by-Step Roadmap

TLDR: Here’s the overview. 

1. Gather info: Collect W-9 forms from your contractors ASAP. (Pro Tip: I always do a review in November to make sure I’m not caught rushing to collect all of these in January)

2. Choose your method: Decide between paper filing or e-filing (hint: e-filing is the way to go).

3. Fill out the forms: Use the W-9 info to complete Form 1099-NEC for each contractor.

4. Send them out: Mail to your contractors by January 31st.

5. File with the IRS: Submit to the IRS by January 31st.

Pro tip: If you're using payroll software, they should help handle 1099s for your contractors. One less thing to worry about! 🎉

Why 1099s Matter (Beyond Avoiding IRS Drama)

Issuing your 1099s timely isn't just about staying out of trouble. It's about:

1. Knowing your numbers: Review your spending and contractor relationships. You might be shocked when you see that number of how much you’ve paid someone throughout the year.

2. Building trust: Timely 1099s show you're a pro & doing business properly. Good for relationships and your rep.

3. Peace of mind: No more tax season nightmares keeping you up at night.

Want all of this, PLUS MORE off your plate going into the new year? Let's chat. Book a call with me, and let's make some money moves. 💸

---

Get A Financial Headstart

Check out the CBFS shop to find resources to support your business journey & make your finances a breeze.

SHIOP HERE

---

Disclaimer: While this guide provides valuable insights, it's important to note that every business has unique circumstances. For personalized advice tailored to your specific situation, please consult with a qualified tax professional. Our goal at CBFS is to empower you to make informed decisions that support your business growth and personal wealth-building objectives.

Disclaimer: Some of the links in this post may contain affiliate links that will provide compensation. 

Disclaimer: AI may have been used to help create, enhance, or review this content. All relevant financial information has been reviewed by a licensed financial professional.

---

Check out these other posts for more: