2023 Form W-9 & 1099 Reminder

It is that time of year when you need to start preparing for issuing 1099-NECs and 1099-MISC. Early preparation assists you (or us if we are preparing on your behalf) in making sure your 1099s are prepared accurately and filed timely.

Q. Who is subject to receive a 1099?

  • Any individual, partnership, and LLC that you have paid for non-employee compensation, services, and rent in excess of $600.00 (Contractors, suppliers, outside services, landlords)
  • Any attorney (regardless of how they are organized to practice) who you have paid legal fees to in excess of $600.00

Q. Who is not subject to a 1099?

  • Typically, corporations are not issued 1099s.

Q. What information do I need obtain right now?

  • The best way to obtain all the information that you need is all located on a W-9, and you are required by law to keep a copy of this document on record in case the IRS requests to inspect it. You can obtain a blank W9
    from the IRS website by using this link W-9 download. SIDE NOTE: Best practice is to obtain a W-9 before you issue a vendor/contractor their first payment.
  • Copy of Photo ID (not required), is also an additional source of information, and assists with confirming the legal name of an individual (who might report a nickname on their W-9) and their address.
  • For individuals that provided you W9s in prior year(s), this is a perfect time to verify that information is still correct. (Did they move?)

Q. What can happen if I do not obtain a W9?

  • You could be subject to IRS penalty
  • You/Your company could be become liable for owing and paying for 24% of the backup withholding that was not withheld.

Q. I thought I heard something about payments to my vendors/contractors that are made by methods other than cash or check being excluded from the total amount I report to them on their 1099s, is this true?

  • Yes, this is true. Vendors/Contractors that accept credit/debit card and 3rd party processors (Venmo, PayPal, CashApp and the like) payments are issued on a 1099-K from the payment processor, and if you report these
    types of payments to them on a 1099-NEC or 1099-MISC, that income is now being reported to them twice.
  • If you are using QuickBooks or QuickBooks Online, payments made by credit card are already excluded from the 1099 Information report. If you are not using an accounting software that handles this task, you will need
    to manually exclude these types of payments.
  • Handling payments processed by 3rd party processing in any accounting software can be tricky. Best practice recommendation – when recording these transactions, use the processor name (Venmo, PayPal, etc.) as the
    “Payee”, record the actual payee in the memo, this will avoid the double reporting of income to your vendor/contractor.

Q. Can QuickBooks and QuickBooks Online assist me in gathering my information in one place?

  • We’re glad you asked! Both versions of QuickBooks can absolutely assist you, not only in tracking the amount paid to a vendor, but which vendors you are required to issue a 1099 to, and store PDF copies of the W9s. If
    you are interested in finding out how, here are a few video links below to get you started. You can also schedule a call or appointment with one of our accounting staff.

QuickBooks Online- How to setup Vendors for 1099s In QuickBooks Online
QuickBooks Desktop-How to setup Vendors from a W9 to receive 1099s in Quickbooks

As always, we are here to assist you, call with any questions regarding the information we’ve provided above.

Your friends at Gray CPA Inc.