1099 Filing Requirements
Businesses have a responsibility to file Form 1099-MISC to all unincorporated businesses that they pay more than $600 to annually. An unincorporated business is a sole-proprietorship, partnership or a Limited Liability Company (“LLC”). In addition to having to file Form 1099 to all unincorporated businesses they must also issue a 1099 for all legal services and medical payments. It does not matter what type of entity these companies are. All payments made to them must be reported on a 1099. The 1099’s are due to the recipient by January 31, 2014. They are due to the IRS by February 28, 2014.
In the past, there did not appear to be much enforcement of failing to file 1099’s. Now, the IRS has gotten much more serious about filing these forms. Now, on all business returns it now asks if you were required to issue 1099’s and, if so, did you. Taxpayers that are required to file 1099’s must do so as they are now making a representation on their business returns annually that they are or are not required to file 1099’s.
Form W-9
To get the information necessary to complete the 1099 Forms the payor will need to obtain Form W-9, Request for Taxpayer Identification Number (TIN) and Certification. The form will document the following:
*Name
*Address
*Tax Identification Number
*Declaration that the recipient is not subject to backup withholding
Caution should be exercised when accepting a W-9. Some smaller unincorporated businesses will have a federal tax identification number and some will merely use their social security number. Additionally some will have a trade name doing business as (D/B/A) and others won’t. It’s important that the name and tax identification number on the W-9 be consistent with how the recipient taxpayer declares this on their income tax return. A mismatch between the two will likely cause an inquiry to be generated from the IRS.
The W-9 is not sent to the IRS. It is merely held on file, similar to a W-4. By obtaining the W-9 now it will be much easier to issue the 1099’s timely in January.
Other Considerations
In addition to obtaining IRS Form W-9 before hiring any subcontractors, business owners should have other items in their checklist. The first would be to have a contract with the subcontractor. The contract would detail the specifics of the job. Additionally you would want to obtain a copy of the subcontractors’ certificate of insurance and state license.
Will you get Form W-9 Now?
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Tom Scanlon has over thirty years experience in public accounting with an extensive background in the areas of financial, tax, and estate planning. He prides himself on providing in-depth and customized solutions to privately held businesses and their owners. He is a Certified Public Accountant and Certified Financial Planner®. Tom is a frequent speaker for area organizations and has recently been quoted on CNBC, Fox 61 News and AARP's blog. Tom also has been a guest columnist for numerous publications including The Wall Street Journal, Barron's, Money Magazine, The Hartford Courant, The Hartford Business Journal, and The New Haven Register. He is a member of the American Institute of Certified Public Accountants, the Connecticut Society of Certified Public Accountants, and the Financial Planning Association. Active in the community, Tom supports a variety of not-for-profit organizations.
