Jenni HughesJenni Hughes
How Do I Know if I Need to Send a 1099-Misc?

How Do I Know if I Need to Send a 1099-Misc?

Every January a business owner needs to consider whether 1099’s need to be sent to contractors they worked with throughout the year.  

What is a 1099?

A 1099-Misc is an IRS form required to be completed and sent to non-employees no later than January 31, 2020.  Similar to a W-2, a 1099-Misc is a tax form showing how much was paid to a vendor or subcontractor throughout the year.  The 1099-Misc is only required if you have paid over $600 to the contractor.  

Who gets a 1099-Misc?

Step 1 is to determine who you paid over $600 in 2019.  

Step 2 is to determine if the individuals you paid are considered employees or independent contractors.

Step 3 is to determine if the businesses you paid are corporations. 

Do I need to file 1099s

What is an employee vs. an independent contractor?

Typically an employee receives regular paychecks.  The business controls the work that is done by the employee, usually provides benefits to the employee and the business pays all the expenses it incurs throughout the year.   At the end of the year the employee will receive a W-2. 

An independent contractor often works for more than one business.  They will contract with a business for a specified project and determine how the work is completed.  Usually a contractor is not paid regularly, but rather at the end of the project for a contracted amount.  An independent contractor will receive a 1099-Misc.

How do I know if a business needs a 1099-Misc?

A business does not need a 1099 if it is a C corporation.  LLC’s typically need a 1099-Misc unless it is taxed as an S corp or C corp.  The best way to determine this is to request a form W-9. This will give you the business information needed to prepare the 1099-Misc and also indicate how the LLC is taxed.

Some common types of vendors that may need a 1099-Misc are a cleaning service, landscaper, graphic artist and web designer.  Also, if you pay rent for your space to a person rather than a rental company, that person will also need a 1099-Misc.

If you need help determining who needs a 1099-Misc and getting them filed, let us know.  We are happy to help!

About Jenni Hughes

Jenni has a BA in Communications from the University of Wisconsin and an MS in Accounting from UW-Milwaukee. Even though she’s a Packers fan, we still let her work for our Chicago-based firm. When she’s not attending her kids’ soccer, basketball, or football games, she enjoys exercising, paddle boarding, and traveling.