QUESTION: Do I need to issue 1099s and who exactly are they for?
ANSWER: Typically, your tax accountant will handle the filing and distribution of Form 1099-MISC but we can definitely gather the information. In general, a business owner must issue this form to any person you have paid at least $600 in rent, services, prizes, awards or any other income payment during the course of the year. Penalties are minimal ($30-$100 per missed form) and typically we don’t have many in this industry, but the fees increase if you intentionally disregard the requirement.
The list of required vendors/sub-contractors does have some exceptions: you don’t have to send a 1099 to S or C-corps, or partnerships that are taxed as S or C-corps, unless they are a lawyer (the government doesn’t trust lawyers will report their full income so even if they are a corporation, you must issue them a 1099:)
Another exception is if you pay these vendors with a credit card, Paypal or Venmo- they can be excluded because the 3rd party payment processor will be responsible for issuing the 1099.
There may be times that you or your tax accountant are not sure if the vendor is eligible for a 1099 so it is always best to request a W9 from individuals as soon as you start the relationship and begin making payments. The W9 will specify what type of entity the individual/company is and how they are taxed which will allow us to determine whether we should issue and file a 1099.
We can gather a list of the vendors, record their tax ID and address (received from the W9), and how much we paid them over the course of the year, and forward over to your tax accountant to process.