January is always a busy month for companies. You’re trying to get business off to a good start in the new year, you’re trying to close the books on last year, and there’s 1099 reporting to complete by month-end.
There are several variations of the information returns known as Form 1099. Most are specific to certain industries. But nearly every company, large or small, has to issue Form 1099-MISC. And you have to send it to recipients by January 31, 2013.
In many businesses, it becomes a late-January panic. There’s a scramble to find out who needs to receive the form, their current address, and their taxpayer ID number. But if you’re smart, you can get a head start on that before year-end.
You use Form 1099-MISC to report miscellaneous payments to non-employees. This includes fees for services paid to independent contractors, such as consultants, Web designers, accountants, lawyers, and others. If you pay fees to your outside directors, they should be on the list. Generally, you don’t report fees paid to corporations, but there are exceptions. For example, you must report payments to all law firms, incorporated or not.
You obviously won’t know the dollar amount to report until after year-end. But you can start to assemble the list of recipients, verify whether they’re a corporation, and obtain their taxpayer ID information. Ideally you would have a process to collect this information when a new contract is signed. But if not, December is a perfect time to do the ground work. Then you might have one less crash project at the end of January.
Contact our office if you need more information on your 1099 reporting requirements.
Written by: Doug Rodrigues