Business owners are required to file a Form 1099 with the Internal Revenue Service for each person or non-incorporated business to whom they have paid $600 or more during the year for services as part of their trade or business. A 1099 is also required for any payments generally categorized as rent, equipment rental, non-employee compensation, medical payments and legal fees. This rule applies to payments made by company check, cash, ACH bank transfer and Zelle. Payments made by debit card, credit card, PayPal, Cash App, Venmo, Square and Stripe are excluded from the 1099 NEC/MISC requirement since the 3rd party networks report those payments directly to the Internal Revenue Service via a 1099-K.

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For tax reporting purposes, you should always collect a signed Form W9 from any new vendor or contractor that you anticipate paying $600 or more for services.  They will complete the Form W9 with their business name, address, tax identification number and federal tax classification of their business entity.   This information will be used to determine if they need to receive a Form 1099.

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There are substantial penalties assessed by the Internal Revenue Service for failure to file timely and accurate Form 1099’s.  Journals & Ledgers electronically files Form 1099’s for our clients based on the required Form W9’s provided to us.

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