Filing Forms 1099

Short Version

If you paid a contractor (non-employee) $600 or more in 2023 you are required to issue them a 1099-NEC to report this payment. This could be cleaners, photographers, VAs or coaches. You also have to report payments of rent, or royalties or even attorney fees on Forms 1099-MISC.

Longer version

Of course, IRS has some exceptions….

If you paid via credit card or Paypal, the merchant service company will report that income.

If the business is setup as a Corporation or S-Corporation they are also exempt from the filing requirements. LLCs and sole proprietors are entities that require the 1099 filing. (Best way to find out what type of entity you paid is to ask for a W9).

Do I Really Have to?

If you’re filing any business tax form, including a Schedule C or Schedule E (for rentals), there is a checkbox where you (or your CPA) will need to answer a few 1099 questions. Usually the following two questions:

Did you make any payments that would require you to file any Forms 1099, check the "Yes” Box.
Followed by “Did you file the forms?”
So, ultimately, you will be disclosing on the tax returns your compliance or non-compliance on this.

IRS is charging increased penalties for failure to file or late filing, and they calculate per form. This can add up quick! Here’s the table I found on IRS.gov regarding penalty calculations:

We can help:

We’re happy to do the filing for you. Please let us know if that’s a service you’re interested in for 2023.

If we are already your bookkeepers, we can help figure out the total paid to each contractor. You will need to provide us with the W9s for each payee. Once you approve the totals, we’ll take care of filing with IRS, Oregon, and mail or email copies to your payee/contractor on your behalf.

Be sure to let your bookkeeper know if you’re interested in this service by the end of the year so we keep you on our project list.

How Much Will It Cost?

For those who are submitting W9s to us in early January, pricing is as follows:

$75 for file setup and the first 3 forms, additional forms are filed at $10 each.

This includes electronic filing with IRS, Oregon (via iWire) and mailing paper copies to each payee.

**For those who are submitting W9s to us after Friday, January 19, Rush Pricing is as follows:**

$110 for file setup and first 3 forms, additional forms are filed at $15 each.

We plan to submit all forms by Friday, January 26 to allow adequate time to process mailing for each recipient. Any additional W9s received after this date will be submitted in a separate batch.

DIY Method

The form is actually pretty simple, if you only have a few you can likely follow the directions on IRS’s website and fill them out and file by hand.

1. Gather W9s from each Payee. I highly recommend you start early on this, it can take a while to hear back from each person.

2. Purchase the forms. IRS does require that you send in red scannable forms (available at Office Depot and Amazon; order early though, they always run low near the deadline).

3. You will need to fill out a cover sheet called a Form 1096 that totals the amount reported on each form. Then send a copy to IRS, keep a copy for yourself (and your CPA) and send a copy to the payee.

4. You also have to submit the same information filed with IRS to Oregon’s iWire system to report the income to the state. https://www.oregon.gov/dor/programs/businesses/pages/iwire.aspx