There’s a question on most business tax returns that says “Are you required to issue 1099s this year?” and a follow up question that says “Did you do it?” If you do your own taxes and are simply checking the box that says “No—not required” or telling your #taxpro that you didn’t have a filing requirement you are opening yourself up to some really stiff penalties and something called backup withholding. On January 1, 2016 the penalty for not filing 1099s is $100 per item not filed. The deadline for filing was moved up this year to January 31st. So if you need to file some 1099s, you need to do it (or find help) quickly. The penalty goes up if you wait to file or fix errors until after August 1 of the tax year. If you have a lot of contractor employees that can add up quickly, but here we’re talking about landlords (and a couple of other surprises).
In general, if you are in business, it is a good idea to ask anyone with whom you do business to complete a Form W9 (if it isn’t a huge corporation, for example, Staples—you don’t have to 1099 Staples). This includes your contract IT person and/or the person or company that maintains your website, your landlord, and your lawyer (one of the exceptions to the corporation rule). Even if your lawyer is organized as an S- or C- corporation you still must issue a 1099 if you paid them over $600 in the tax year. If you are a farmer or in another business that uses veterinary services, you must also issue a 1099 to your veterinarian, even if s/he is incorporated!
In theory, you should not get push back for asking for the W9, but in practice it doesn’t always work that way. It is important to understand that if your contractor does not provide you with a taxpayer ID number (either EIN or SSN) and tell you how the business is organized you are responsible for backup withholding at a rate of 28%! Don’t let this happen to you. Ask the right questions, give your #taxpro or your tax software accurate answers, and file your returns on time!