Growth Exchange
Managing 1099 Vendors
Topics
1. Know your vendors
2. Reportable? Who and what you pay determines
whether you must report
3. Form W‐9 and when to require one
4. Form 1099‐NEC – new in 2020 specifically for non‐
employee compensation
5. Form 1099‐MISC – diverse payments are reported
on this form
6. Improving the process
Know Your Vendors
- Investigate payments to unknown vendors
- Inactivate vendors no longer being used
- Combine duplicate vendors
- Who can sign checks?
- Who is authorized to use debit cards?
- Who reviews and approves charges?
- Who reviews the vendor list?
Who do you pay?
1099s are sent to:
- Individuals/sole proprietors
- Partnerships
- LLCs if the LLC is taxed as a sole proprietor or partnerships.
Who do you pay?
- Corporations — unless you paid the corporation for medical or legal services.
- LLCs taxed as corporations
- Nonprofits and government entities
What do you pay?
Reportable Payments
include, but are not limited to:
1. Compensation for personal and/or professional “services” (inc
luding parts & materials
used in performing service) including accountants, attorneys, a
rchitects, physicians and
nurses, directors, referral fees, experts in legal adjudication
, witness fees, and
instructors / teachers / trainers
2. Copying services
3. Rental fees (all types of rent, e.g., equipment, building spa
ce, lodging, storage,
banquet rooms, booth space, etc.)
4. Catering
5. Registration fees for conferences, training, workshops, etc.
6. Membership dues
7. Honorariums, speaker fees, entertainment, etc.
8. Merchandise that is
custom‐made
or contains the client’s logo
9. Advertising – print, radio or TV, display ads, billboards, etc.
What do you pay?
Non‐Reportable Payments
include, but are not limited to:
1. Total payments during the ca
lendar year were less than $600
2. Expense Reimbursements to non‐employees/students substantiate
d by original
receipts – where required
3. Insurance premiums
4. Utilities (e.g., telephone, gas, electric, cable, etc.)
5. Merchandise ‐when no service, such as installation, training,
technical support,
customizing, etc., is included in the purchase
6. Food/Meals purchased (that are not catered and not part of a
banquet, workshop,
etc.)
7. Software – when no software support is provided or where no an
nual renewal fee is
required to continue using software
Form W‐9
Includes vendor name and address, entity type, SSN/EIN, and certification that information supplied is true and correct.
When to Require a Form W‐9
- Best practice ‐ ask all vendors for a Form W‐9,
especially if know you will be paying them $600 or
more for services during the year. - If paying your independent contractors through a
payroll system, a Form W‐9 will be required. - Form W‐9 should be updated when information
such as name or address changes. - Stay on top of missing Forms W‐9 throughout the
year.
Form 1099‐NEC
Used to report non‐ employee compensation, including attorney fees, of $600 or more.
Form 1099‐MISC
Used to report rent, medical and health care payments, etc. of $600 or more. Also report royalties of $10 or more.
Penalties and Missing SSN/TIN
If you miss the deadline and cannot show reasonable
cause, the IRS can assess a
late penalty based on how
late the payment is. The amount is determined based
on when you file the form.
Forms filed with an incorrect or missing SSN/EIN will
generate a “B” Notice and possible fines.
Improving the Process
Review your vendor list quarterly.
Attach the completed Form W‐9 to the vendor record
in the accounting system.
If you receive “B” notices every year, the IRS TIN
matching program can help identify incorrect numbers
so you can follow‐up with vendors before the 1099s
are filed.
Questions?
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