If your business hires individuals or small companies, you are most likely required to issue 1099s to these individuals or entities.
You should have a W-9 on file for each of these entities. If you have not collected W9s, now is the time!
Any individual or any unincorporated business that you pay $600 or more in a year will need to have a 1099 issued BY YOUR BUSINESS. If you hire a cleaner to clean your office, this is a subcontractor. If you hire a helper to assist with a project or event, this is a subcontractor. If you hire someone to mow your lawn, this is a subcontractor.
You are obligated to find out if this subcontractor is incorporated or not. If the subcontractor is not incorporated, you must report the total that you paid the subcontractor to the IRS by issuing 1099s. So how does this work?
When you hire an individual or company, you should collect a W9 before issuing a payment. The W9 is a form that the subcontractor completes with his/her legal name, mailing address, and tax ID number. The W9 will also let you know if the business is incorporated. These incorporated businesses do not need 1099s issued, they are the exception. You need to have this information in order to complete the 1099s.
I know, I know….you have hired subcontractors and you now realize that you have not collected these forms. I’m not suggesting that this is ok, but let’s be real. Many of you simply have not followed the “proper” procedure. I get it.
But if you haven’t collected W9s by now, you need to get busy! The deadline for issuing 1099s is January 31 of each year. It will be here again before you know it. You can find the W9 here.
For detailed information about subcontractors and IRS regulations, go to the IRS website here.
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