As my staff has reached out to clients requesting W9 forms for those we don’t have on file, I have found there are a lot of misunderstandings regarding who is considered a vendor for 1099 reporting. I’ve heard comments such as “You don’t need a W9 for them because they aren’t a vendor; I paid them rent” or “They don’t need a 1099 because they didn’t perform a service in my business, they are my coach” or many similar comments.
I think the misunderstanding begins with the definition of the term vendor. Many seem to think this is only someone who works with them in their business but is not an employee. However, vendor means any person or company paid by your organization in the capacity of your business. Therefore, every payment you have made from your business is to a vendor.
Although there are some exceptions, the basic rule is that if you paid someone $600 or more and they are not a corporation, they are subject to reporting. You also must determine for those with LLC in their name if they are a single-member LLC, partnership or corporation. If not a C or S corporation, they are also subject to reporting. The proper way to do so is to request they submit a W9 form to you.
The IRS has increased penalties for failing to file 1099 forms timely. I previously wrote a blog on this topic. To read more about the fines, see https://affordablebookkeepingandpayroll.com/deadlines-shortened-penalties-raised-forms-w-2-1099/
It is our recommendation that you have 1099s sent to your recipients within the next few days so they have time to review the information prior to filing them with the IRS which are due on January 31. This allows you to make any necessary changes prior to final forms being submitted.
Image courtesy of Stuart Miles and freedigitalimages.net
