Eric Sheldon CPA, PC

To 1099 or not to 1099

Tax reporting. Filling out tax forms

January 31st is the deadline for Form 1099-NEC/MISC. During the first month of the new year, you are hopefully rejuvenated from time off during the holiday. For some, it is met with scrambling to get the books in order for year-end close, to file taxes and fulfilling requests from accountants for missing data.

One request is usually asking for a vendor’s tax ID. At the time of paying invoices, the last things you may be thinking about are: “Will I be sending this vendor a 1099 at year end? Should I be getting a W-9?”

To simplify what the IRS says on their website, IRS regulations require that we issue 1099 forms to certain companies and individuals. In order to accurately prepare these forms, the IRS requires that we obtain and maintain form W-9 for all of our vendors.

As you can see, “IRS requires you issue 1099 forms to certain companies and individuals …” It is next to impossible for you to know if you should 1099 or should not 1099 for a particular vendor. In order for you to minimize or eliminate issues regarding Form 1099 at year-end, you should request a W-9 from every vendor. There are some exceptions. For example, you don’t necessarily need to ask a W-9 from certain companies like AT&T, but they may comply and give you one.

If you don’t currently have a process in place, I recommend that you use the attached documents and update the W-9 request letter with the entity name and address. You will want to implement this immediately with your new vendors, prior to paying the first invoice. Review your current vendors and send out requests prior to paying their next invoice. It may take some practice but once you’ve standardized this process, you’ll take the guessing game out of “who should receive a 1099?” and have a much better experience at year end.

Hope you find this newsletter informative.

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About the Author

Eric Sheldon

Eric Sheldon

Eric Sheldon is a certified public accountant with more than 25 years of experience in a wide variety of industries. He's the owner/operator of Eric Sheldon CPA, PC, an accounting firm that specializes in providing tax strategy and preparation, accounting, and bookkeeping services to individuals and small business owners.

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