As the deadline to file 1099s quickly approaches, more and more clients seem to stress out because they’ve waited until the last minute to file their 1099s or to gather the information needed to file. Throughout the year, they say “I don’t have time to get information before paying a bill,” or “I’ll just wait until the end of the year to gather 1099 information.” Then, when it’s the end of the year, they spend hours gathering tax IDs, addresses, and amounts paid to vendors to report on their 1099s. Here are a few tips that small business owners can do throughout the year to make the 1099 filing process seamless – and stress free!
Gather Vendor Information When a Bill is Received
When you receive a bill from a new vendor that may require a 1099, request a W-9 immediately and save the document in your records for year-end. Requesting W-9s throughout the year can save lots of time calling vendors for their information at the end of the year.
Mark the Vendor as a 1099 Vendor
In most accounting software such as QuickBooks, Sage, as well as various others, there is an option to indicate whether a vendor is a 1099 vendor or not. When a new vendor is added, within the vendor details indicate that the vendor is a 1099 vendor just by checking a box. Also in the vendor details is a place to enter the Social Security Number or Tax Identification Number of the vendor. If a W-9 is requested and received in a timely manner, this number can be saved within the software, ready to be used at the end of the year. Again, this can save a significant amount of time at the end of the year searching for these numbers because they’re saved right in the system.
Set up 1099 Accounts
Using the accounting software can save so much time when preparing 1099s. Setting up certain expense accounts as 1099 accounts allows you to pull reports for payments to vendors expensed to those accounts. For example, contract labor is a service that needs to be reported on a 1099. This is an account that would be indicated as a 1099 account within the chart of account settings.
If the above three steps are taken, 1099 reports can easily be run through the accounting software at year-end. These reports can include the vendor, address, EIN or Social Security Number, the expense account, and the amount to be reported, all in one summarized report. After a quick review of the information, 1099’s can be easily filed.
As a reminder, a 1099-MISC needs to be filed to each vendor that an employer paid $600 or more in services, rents, prizes, or other income payments. Generally payments to corporations are not required to be reported on a 1099-MISC.
Starting the year off right by tracking your 1099 vendors can make for a seamless filing process come January 2019. If you have questions regarding 1099s or setting up 1099 vendors and accounts in your accounting software, contact Holbrook & Manter today.