October 17, 2024

As fall settles in, many of us already feel the excitement of the upcoming holidays. While this is a great time to take a breather and reflect on the year, it's also important to shift focus and consider your practice's compliance.

This is particularly true when it comes to wrapping up the accounting for any 1099 contractors you’ve hired over the past year.

Independent contractors, commonly known as "1099 contractors," are not employees but individuals or businesses that provide specific services to your practice. Whether it’s a one-time project like repairs or an ongoing service such as marketing support, it’s crucial to understand your legal responsibility to report certain payments to these contractors.

Who Needs a 1099?

The rule is simple: if you’ve paid any individual or business more than $600 for services during the year, you may need to issue them a 1099. Keep in mind that this applies to services, not goods. These contractors may include, but are not limited to:

• Consultants
• Office cleaners
• IT support professionals
• Freelance marketers

Some payments do not require a 1099. For example, if you paid an S-Corp or used a credit card for the payment, you’re off the hook. However, for many other payments, especially those made via cash, check, or direct deposit, a 1099 may be necessary.

W-9: Your First Step

To file a 1099, you must have a Form W-9 from the contractor. The W-9 form provides information, including the contractor’s tax identification number, which is required to file the 1099 with the IRS. As the end of the year approaches, now is the perfect time to check your records. Identify any contractors who might require a 1099 and reach out to them to request their W-9.

Many contractors are accustomed to this process and will quickly provide the required information. Once received, forward a copy of the W-9 to your CPA or accounting team to ensure everything is in order.

Why Compliance Matters

Issuing 1099s may feel like an administrative chore, but staying compliant with federal tax law is critical. Failure to do so can lead to penalties, audits, or worse. Ignoring 1099 reporting could flag your practice for potential review by the IRS, leading to time-consuming complications.

If you’re ever unsure whether a 1099 is required, it’s better to ask. Our team is here to help you navigate these requirements and keep your practice on track.

Stay Ahead and Avoid the Rush

Taking a few moments today to ensure you have all your contractor paperwork in order will help your practice run smoothly and minimize stress when filing in January.

If you need assistance or have questions about your 1099 responsibilities, please contact us. We’re here to support your practice every step of the way!