It's time for 1099s
Note from Donna by Larissa... As we approach year end it's crucial to begin working on 1099s, W9s, and any additional financial records that are unique to your business.
Time for 1099s
Alrighty folks, we are swiftly approaching the end of the year! Everyone! Panic! Go into a frenzy preparing for the holiday season! It’s time to talk to family and friends that we might not have talked to this year! But before you go into a panic, we should take this time to talk about the season after the holidays: tax season. That’s right, today we’re going to be talking about 1099s and why you and your accounting team should be preparing them for year-end now.
First off, 1099s take a lot of unnecessary time, and that time increases exponentially when you have a deadline of 31 days. Those who lollygag on preparing their financials are more likely to face delays and penalties in their next tax year. These penalties might not seem like much individually, but they can definitely add up, and who likes paying the IRS extra anyway? To ensure a smooth 1099 filing process, work closely with your accountant. Keeping well-organized records throughout the year is a lifesaver for both you and your accountant. Receipts, payments, invoices, and a detailed list of your vendor's information are all necessary for a quick filing process. Especially your vendor information. Having access to phone numbers, emails, TINs—whatever you can get to your accountant—is better because instead of you chasing around your vendors, your accounting team can fill in for that process.
Remember that your 1099 list will be composed of your independent contractors, your freelancers (that includes Upwork!), attorneys, and other small-to-medium business professionals for whom you pay more than $500 a year. Your accountant should be classifying these payments correctly, but if they aren’t, then be sure to correct them.
W-9 forms are the building blocks of accurate 1099 reporting. Request W-9 forms from all vendors and contractors at the beginning of your working relationship. These forms provide essential information, including the recipient's name, address, and taxpayer identification number (TIN). Having W-9 forms on file ensures that you have the necessary details to complete the 1099 forms accurately.
For those of you following the Profit First system, I have good news for you! Your allocations to your tax account throughout the year should be looking like quite the nest egg by now! Be sure to talk to your Profit First professional to adjust your allocation percentages for last-minute requirements! The idea of Profit First comes to fruition in tax season because there is no need to scramble around raising enough funds to pay off next year's taxes. Instead, because we have put our tax money in an untouchable account, we have enough money to not feel the hefty payments we may be making.
Remember, the key to success here is preparation. By staying organized and having a conversation with your accountant now rather than later, we can navigate the 1099 filing process with confidence. It’s also a great time to talk to an accountant about setting up a strong 1099 filing process year-to-year, so you need less preparation time next year. Because the process is the same from year to year, our accountants knowing what they need to know ahead of time can make tax season feel like a walk in the park.
Here's to a smooth and successful year-end 1099 filing season!