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Important Information About 1099 Vendors
A 1099 Vendor is anyone you have made a payment to (a Payee) in the course of your trade or business who is not a “Corporation”. Corporations do not require 1099 reporting with the exception of Attorneys. Attorneys receive a 1099-MISC whether they are incorporated or not.
The threshold for reporting is accumulated payments made to a particular vendor (Payee) totaling $600.00 or more in a calendar year.
- Who is required to report 1099 Vendors
Anyone engaged in trade or business for gain or profit. Non-profit Organizations who are considered to be engaged in business are also subject to these reporting requirements.
- Why do I want to report 1099 Vendors?
First, it is required by law. Second, if you don’t report 1099 Vendors, you risk losing the tax deduction for the amounts paid to 1099 Vendors, and you are subject to penalties of up to $50.00 per information return (each Payee per year is one information return) to a maximum of $250,000.00. In some cases, the penalties can be $100.00 per information return with no maximum.
Penalties are assessed for “Failure to File Correct Information Returns by the Due Date”. This means you are assessed penalties for not filing, for filing late, and for filing incorrect information.
Your Bookkeeper or Accountant can file your 1099’s. Or, for detailed Instructions on how to file 1099’s please refer to IRS “Instructions for Form 1099-MISC” and “General Instructions for Forms 1099, 1098, 5498 and W-2G. (see below for download instructions)
- What information will I need to provide to my Bookkeeper or Accountant in order to file 1099’s
You will need to provide the Payee’s legal name, address and Tax ID number. This information is obtained by providing your Payee’s with a W-9 form to complete and sign. You can download the current form at: http://www.irs.gov/pub/irs-pdf/fw9.pdf
You will want to have the completed and signed Form W-9 on file to protect yourself from penalties in case the Tax ID number or Payee address submitted on the 1099-MISC form is incorrect or invalid.
You will also need to provide the total payments made to the Payee for the calendar year. A summary per Payee, as well as a detailed breakdown of check numbers, dates and amounts, is important.
If you use QuickBooks, and QuickBooks is set up properly, you can automatically generate the information and print 1099s' from QuickBooks.
- What happens if the Payee does not return the W-9 form?
You are required by law to withhold 28% from payment if the Payee fails to provide you with the completed and signed W-9 form, including their Tax ID No. The money withheld is considered “backup withholding” and is reported to the IRS.
I suggest you provide your Payee/Vendor with a W-9 form immediately upon engagement and before submitting payment to avoid scrambling to gather this information at year-end. If the vendor is not in compliance it will be too late to withhold the amounts required by law.
The copies sent to Payees are to be submitted and postmarked by January 31st of each year.
The original 1099-MISC forms and Form 1096 need to be submitted to the IRS by February 28th. | 
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