What is a 1099?
Simply put, a 1099 is a form that reports compensation that would not be captured on a W2.
Who gets a 1099?
Any individual, partnership, LLC, Limited Partnership or Estate that falls into one of the following four categories.
1. Contractors You Have Paid > $600: Contractors are Graphic Designers, Accountants, Lawyers, Plumbers etc. What are they not? Employees. If you paid a Contractor more than $600 throughout the year, send a 1099, if less, don't worry about it.
2. Your Landlord: This includes anyone you have paid rental payments to throughout the year.
3. Anyone You Have Paid Interest Payments To: If you have a loan you are paying off, you are likely paying off a portion of the principal each month and the rest is for interest. That interest payment must be reported as it is "income" to the debt holder.
4. Anyone You Have Paid Prizes or Awards To: Did you raffle off a $500 American Express Gift Card at your Christmas Party? Report it!
When are 1099s Due?
1099s are required to be postmarked by January 31st (or the next business day if it lands on the weekend). Thinks that sounds like plenty of time? Think again, hunting down all these people for tax ids and current addresses can be very time consuming.
The key to avoiding a panic attack on January 28th?
Make sure you get a W9 from contractors, landlords and debtors before you pay them. Enter that 1099 information into your accounting system when you receive it. Voila - 1099s are a breeze.