Happy Thanksgiving! In a little over a month, it will be 2015 and time to execute your year-end accounting “to do” list. Getting your 1099s out now will save time later. Here are some tips to do just that:
Go through your vendor list. Identify each contractor and ensure their eligibility as a 1099, then mark them in your accounting system specifically.
If you haven’t already, obtain a W-9 form from each contractor. Update each contractor’s address and federal EIN to ensure prompt receipt of the 1099. Make any changes in the way you are paying them or withholding taxes.
Ask each contractor for a worker’s compensation certificate. If you don’t have one, you may need to add their payment totals to your payroll amounts on your worker’s compensation audit worksheet.
If your accounting system doesn’t break out payment type, you’ll need to do that on a separate spreadsheet before you input the 1099 amounts. Contractors paid with a check will require 1099s. Contractors paid via PayPal or credit card will not. If you have paid them both ways, break it out. Accomplish the bulk of the work now and post the remainder of the year after year-end.
Re-evaluate each contractor as to whether they meet the employee versus contractor tests from the IRS. You will be responsible for social security, withholding, and other payroll taxes if you are accidentally mis-classifying a contractor who the IRS defines as an employee. Beware! This is a hot “red flag” area for the IRS. They are actively looking at employers and accurate/inaccurate 1099 classification. There is a silver lining. They also have created a Voluntary Classification Settlement Program for people who have been mis-classifying workers in the past and want to adjust their systems.
Following these tips will put your accounting in great shape for year-end. If you need help catching up with your contractors or with any related accounting issues, please give us a call (775) 720-3282.