For small business owners, IRS tax forms can be confusing — especially when it comes to 1099 forms.
A business’ 1099s need to be sent out by the end of January. And with the increasing nuances in forms, employers more than ever need to be on top of their tax games.
To help avoid tax penalties and blunders, here are five tips you’ll want to consider when sending out your IRS 1099 forms:
1. Stick to the Deadlines.
Business owners typically have until January 31 to mail their IRS 1099 forms to service providers and contractors, but remember that you also need to send those forms to the IRS.
The deadline to submit 1099s to the IRS this year is February 28. According to Forbes, this gives business owners a good 30 days or so to correct any errors in 1099s sent out in January before sending them to the government. Regardless of whether you send both copies on the same date or with the 30-day gap, don’t miss either deadline.
2. Get Up to Speed on Form 1099-K.
Form 1099-K is a relatively new form used to account for payment processing companies. If you made more than $20,000 in sales through at least 200 transactions in the last tax year, you should receive one or more of these forms from a credit-card or payment-processing company.
Use their numbers to check your own income calculations.
3. Don’t Forget the More Common 1099 Forms.
The IRS prints about two dozen “1099”-series tax forms covering many different types of situations. Business owners will want to pay special attention to:
Form 1099-B. This is used to account for stocks, bonds, and securities. Businesses have until February 15 to mail these out.
Form 1099-MISC. If your business paid more than $600 to any contractors, you’ll likely need to send out 1099-MISCs to those non-employees.
Form 1099-DIV. Dividends on investments are a great source of income, but your business needs to report that income.
4. Use Scannable Forms.
All of the IRS’ 1099 forms are available online, but the examples provided are not necessarily scannable. Unfortunately, whatever your company sends out to the IRS or consultants/contractors must be scannable. Determine which forms you need for this tax year and order the official, scannable forms from the IRS.
5. Consult With Tax Counsel.
If you don’t already have legal assistance with your business’ tax concerns, contact a knowledgeable tax attorney in your area.
Proper tax advice on 1099s tailored to your business’ needs can demystify these forms and help employers avoid costly audits.