Do I Need to Send a 1099?

As a small business owner there are various reasons you might need send a 1099 to a vendor. 1099s are not just used to report earnings to a contractor. They are used to report payments to various vendors you may use in your small business.

As a general rule, you need to send 1099s to anyone who provided services to your business if you paid them more than $600 in a calendar year. Note – just because you pay less than $600 does not mean that the amount is not taxable to your contractor/vendor. It just means you don’t have to report it on a 1099.

You do not, generally, need to provide a 1099 to vendors you use to purchase supplies or tangible goods.

Here are some high-level 1099 guidelines to follow in small business.

1. Rent – In most cases, you need to send a 1099-MISC to report the rent you’ve paid to your landlord. If you own your own building, but you’ve set it up in a separate legal entity from your operating business, you’ll need to send yourself a 1099 for the rent you paid to the real estate entity.
2. Contractors – When you pay a contractor or freelancer, you’ll use form 1099-NEC. This is a newer form that has been used the last few years. Prior to this form, all payments were reported on a 1099-MISC.
3. Interest Paid – If you’ve paid interest to an organization that is not a formal bank/institution, you need to report the interest paid to the individual or entity. This is reported on a 1099-INT.
4. Attorney’s fees – when you pay an attorney for services, you report those services on a 1099-NEC. If you pay any form of settlement or proceeds, those are reported on the 1099-MISC.
5. Service Providers – marketing companies, IT companies, cleaning companies, etc. will need a 1099 if you’ve paid them more than $600 in a year.
6. Generally, you do not have to report payments made to a company that is set up as a corporation. This exception does not apply to attorney’s fees.

As a small business owner, it’s important to remain compliant with tax reporting. Inaccurate reporting or missed deadlines can result in penalties and fees that can be detrimental to a small business!