(The Deadline is January 30, 2024)
Each year at about this time, businesses face a challenging task: 1099 reporting. By law, every company must ensure that each qualified vendor and contractor gets a 1099 tax form before January 30.
Being prepared now is critical because errors can lead to large IRS penalties.
What do I need to File?
Every company must report its payments to vendors and contractors to both the IRS and the vendor themselves, using the 1099 form. The deadline for this submission is January 30 for payments made in the previous year. (e.g. By January 30, 2024, you must report all payments made during 2023.)
To do this, you’ll need accurate records of your payments to each vendor, plus the vendor’s legal name, corporate address, and tax identification number. All that information must be entered into the 1099 and mailed (or e-mailed) to both the vendor and the IRS.
How do I get Prepared?
The IRS knows this is a tall order, so they created another form called the W-9. Each vendor should fill out a W-9 before they even begin working for you…but it is your responsibility to ask for a completed W-9. And you should do that before you pay the vendor’s first bill; once the bill is paid, the vendor has no incentive to send you the W-9!
If the vendor is an individual—like an independent contractor—the tax identification number is probably their Social Security Number. But you don’t have to worry about the details — the W9 form asks all the right questions.
The Possible Penalties
Copies of the 1099 must go to the vendor (by mail or email) and to the IRS (by electronic submission or mail). All of that has to be done by January 30. But it’s not just about timing; accuracy is equally important.
Missing data or errors on the return can also be costly. Specifically, missing or mistaken details can bring fines. Here’s a breakdown of these penalties:
- Submitting late, up to 30 days after the deadline, the penalty is $60 for each return, capped at $630,500 annually.
- Submitting beyond 30 days from the deadline but before August 1, the penalty is $120 for each return, with a maximum penalty of $1,891,500 annually.
- Submitting after August 1 or not at all: $310 per return, up to $3,783,000 annually.
Make it Easy
Filing complete information on time is easier if you collect W-9s from every vendor and subcontractor as a part of your regular purchasing process. If you don’t already have W-9s for everyone, start collecting them now—don’t wait until January.
You can also simplify the 1099 filing procedure and avoid potential fines by using tools like Tax1099.com. This handy website (and there are others) includes a W-9 and Taxpayer Identification Number (TIN) lookup service. This tool confirms that your data matches with IRS records. This will minimize the errors and protect you from the penalties that come with them.
Of course, websites like Tax1099.com will also file all the forms for you. They’ve automated the delivery to both the vendor and the IRS. It’s a huge timesaver and a great way to keep a clean historical record of your submissions. If a vendor (or the IRS) ever needs to see what you filed, having it all on one website is a lifesaver.
If you’re a QuickBooks user, you may also be in luck: QuickBooks subscribers can e-file 1099s by selecting the Contractor tab in QuickBooks and selecting Prepare 1099s. E-filing is included with QuickBooks Contractor Payments and QuickBooks Online Payroll Core, Premium, and Elite.
Filing 1099s is an annual challenge, and the penalties are substantial for doing it poorly or late. Don’t get caught in the trap this year — collect your W-9s from vendors ASAP and use a reliable online tool to automate as much as you can. The actual reporting has to be done between January 1 and January 30, but you can avoid the penalties by starting your preparation now!
How FuseCFO Stands by You
Are you worried about filing 1099s? Let us help. FuseCFO does more than just maintain records; we provide insight to help you make sound financial choices. Don’t procrastinate. Contact FuseCFO now for a free consultation and make your 1099s easy and your year-end a breeze!