Mastering the Humble 1099: Six Things You Wish You Knew Last Year
Here are some 1099 facts you can share around the holiday table this year sure to spark conversation: the Form 1099 was created by the Internal Revenue Service for use with the 1917 tax year. At the time, employers were required to use the form to report salaries paid in excess of $800 ($16,000+ in today’s dollars). Considering the average wage in 1917 was 22 cents an hour, likely employers weren’t too worried about this pesky new form.
Fast forward to 2019, and chances are you also don’t give a great deal of thought to Form 1099. Not as famous as the W-2, nor as infamous as the 1040, the humble 1099 is still worthy of respect—or at least accuracy. Sage Intacct makes preparing 1099s a straightforward task, but like many things tax related, there are some subtleties and tips and tricks involved in getting it right. Here are six things to know about 1099s, to help you master the task with ease.
1. There’s more than one kind of 1099
Two dozen kinds in fact. To accommodate the distinct types of non-wage income such as interest (10999-INT), cancellation of debt (1099-C), and even payments by the Railroad Retirement Board (RRB-1099), the IRS came up with many variations on the 1099. But for our purposes, we’ll be working with the 1099-MISC, used to report the income paid to independent contractors. You use Form 1099-MISC to file an informational return of income other than wages. That’s the key point – other than wages. You do not produce 1099s for employees.
2. Not all contractors need a 1099
In general, you’ll need to issue a 1099 to each individual you paid $600 or more in rent, services, prizes and awards, or other miscellaneous income payments during the tax year. Notice we said “individual?” That’s because you do not need to issue 1099s to corporations, only to unincorporated businesses, such as partnerships, limited liability companies, limited partnerships and estates. Oh, and in case you were wondering—that $600 would have been worth a mere $25.99 back in 1917.
3. History matters
You will set up your independent contractors as vendors in Sage Intacct, and it requires just a simple check of the 1099 box to indicate that they are (potentially) 1099 worthy. Checking this box in the vendor record means that every invoice you record for this vendor counts toward their $600 1099 threshold. (Depending upon your system’s configuration, however, you can override the box for particular transactions.) Whenever you change the 1099 checkbox, Sage Intacct offers you the option of updating the updating the 1099 status for line items in bills and adjustments linked to that vendor.
4. You can rewrite history
If you’re just getting started with Sage Intacct, you can use a CSV import to populate the vendor data from your prior system. If you have only a handful of vendors to update, it makes more sense to visit each vendor’s record manually and enter the pertinent data. If you need to update or change the 1099 for a vendor, you can easily do that too. This document includes detailed steps to help you out.
5. It’s not all that taxing
With a bit of preparation on your part, 1099 processing needn’t be a time-consuming or overly-complex task. With Sage Intacct busy collecting and storing the required data all year long, come year-end you’ll need only print and review the 1099 report and then print your 1099s directly from Sage Intacct. And don’t forget that other form that the IRS snuck in on us—the 1096—a simple summary form you send only to the IRS along with their copies of the 1099 forms.
6. Deadlines and penalties
For the 2019 tax year, you must file with the IRS on or before January 31, 2020. This deadline applies for both paper and electronic filing. Missed deadlines can be costly, with penalties ranging from $50 to $550 per return.
Ready to master your 1099s? Download this helpful FAQ sheet and sign up for our Sage Intacct 1099 Webinar scheduled for Tuesday, December 17. If you can’t attend, don’t worry, we’ll record it for you. Businesses get busy at this time of the year, and we’re here to help in any way we can. Contact us with your questions.