- Donna Lim
Tax Prep—What you need to know about 1099s in 2021
Every year I have clients that are really confused about 1099’s which is completely understandable. Let’s face it – they are confusing. Let’s see if I can clear a few things up.
First, let’s understand that 1099 season is twofold. When we talk to our clients about 1099’s it is easy to get confused since we may be talking about the ones you send out or we may be talking about the ones you receive. We as bookkeepers need to process both. We need to help you be compliant by sending them out to your independent contractors, landlords, and attorneys. You may also be receiving them, and we need to reconcile your books to them.
To further complicate things, the IRS changed the form last year. We use a 1099 Misc to report rent, other income, interest income and attorney fees. We use a 1099 NEC to report payments made to an independent contractor. Oh wait, we report that if you have paid by check, cash or sometimes 3rd party apps like Venmo. However, if you paid by credit card, they will get a 1099K from their merchant service provider so you don’t send it out.
There are rules about who gets a 1099. If they are a sole proprietor – Yes. If they are a S or C corporation – No. If they are an LLC, well that depends on how they fill out the W9.
As you can see, there are a lot of “if this then that” scenarios regarding 1099’s. This is why we provide this priceless service to our clients. October is the month we start gathering the list for our clients. We need them to collect those valuable W9’s, which gives us information about your vendors.
Do you need help with 1099’s? Is 1099’s one big messy compliance issue that you dread each year? Call us for help!