1099s: What you need to know

What you’ll find here:

• A little bit about 1099s
• Sending 1099s to Vendors
• Receiving 1099s From Customers
• FAQs

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A little bit about 1099s

Forms 1099 are tax information returns required by the IRS to document different types of payments made during the year.

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If you pay independent contractors (non-employees) in your business, there are two types of 1099s to have on your radar:

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• Form 1099-NEC is used to report payments for business services, and
• Form 1099-MISC is used to report payments for rents, royalties, awards, and various other types of income

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If you're deducting a payment to someone as a business expense, the person receiving your payment should recognize that same amount as gross income.1099 filings are used by the IRS as a verification tool to ensure this process is happening

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Sending 1099s to Vendors

General rule: when you pay a vendor over $600 for business services, you may need to report the total amount paid to them each year on a Form 1099 in order to claim a deduction.

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It's considered a 'best practice' to ask all vendors paid for services to complete a Form W-9. A W-9 collects information about how an individual or business is taxed. Requesting this form will:

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• Give you the details necessary to prepare 1099s at year-end, or
• Confirm there is no 1099 filing requirement for that vendor
• Note: if the vendor you're working with is taxed as a Corporation (this includes S Corporations), a 1099-NEC filing will not be required.

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The information provided on the W-9 + how much each vendor was paid during the year will determine your 1099 filing requirement.

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• If you need to send 1099s, our accounting team can help you collect the required information and prepare the forms.

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Receiving 1099s From Customers

Customers that you provide services to may ask you to complete a W-9, so they can determine if they need to issue you a 1099.

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If you receive 1099s, please send them to us! We will reconcile these with the total income you have reported, to ensure no information appears to be missing.

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FAQs

Should I expect to receive a 1099 from every customer?

Not all customers will send you a 1099, and whether or not a 1099 is received from a customer should not impact the total income reported by your business.

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☝️ 1099s are used as a verification tool. As long as all of your income is reported on your financial statements, receiving a 1099 is not a taxable event.