1099 Rules for Landlords and Small Businesses
Are you confused about the new rules about small businesses issuing 1099’s for anyone that they’ve paid over $600 to? Has a company asked you to fill out a W9 form because you or your business is doing some kind of work for them? It seems like everybody is a bit confused, even the IRS. But here’s help.
UPDATED JANUARY 2014
The rules have changed several times since the original post. If you’re preparing 1099s or tax returns for tax year 2013–these are the updated rules.
The 1099 law is actually part of the Affordable Care Act although it has nothing to do with health care. Is your head spinning yet? Seriously, the new 1099 law states that businesses will be required to issue 1099 forms to contractors that they have paid over $600 to.
So who gets a 1099? The law started out requiring you to issue a 1099 to anyone, including corporations that you paid over $600. But there was a lot of backlash over that so you don’t have to issue a 1099 to a corporation now. This eliminates a lot of 1099s! This is great news for me because otherwise I’d be issuing 1099s to AT&T, Office Depot, my software company, my landlord, the gas station, and a dozen other businesses. Now, at least this year, I don’t have to issue any 1099s because everyone I pay is either on my payroll, a corporation, or I paid them under $600.
If you need to prepare 1099s, here’s a link that will give you information on how to do it: How to Prepare a 1099
If you’re a landlord or small business owner you should expect that you will need to file 1099 forms for your contract laborers this year. Start collecting information from them now so that you’ll be prepared come January. You’ll need a W9 form, here’s a link: http://www.irs.gov/pub/irs-pdf/fw9.pdf
Print it out and have all of your vendors sign one. You can be hard-nosed about this too. No W9, no payment. It’s that easy.
If a business that you provide a product or service to asks you to complete a W9 form, it is a legitimate request. If you’re a sole proprietor and don’t have an EIN number, you may want to apply for one so that you’re not giving out your social security number all over the place. If you’d like more information on EIN numbers, read my other post: http://robergtaxsolutions.com/2010/11/how-to-get-an-ein-number-for-your-business-for-free/
You can get an EIN number directly from the IRS for free.
One question that I’m always asked is, “Is there any way to get out of having to issue a 1099?” The answer is, “Yes.” If you pay a vendor with a credit or debit card, you do not have to issue a 1099. The reason is, when you use a credit card to pay a vendor, the credit card company will be issuing a 1099K statement showing the payment you made. So, it you want to reduce the 1099s you have to issue, use your credit card more often.
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