Does your law practice pay for services provided by someone who is not an employee? If so, you need to issue a 1099 form to the Internal Revenue Service.
Simply put, a 1099 (also called an information return) is a form that documents payments made to non-employee individuals or businesses for services rendered. Businesses are typically required to issue a 1099 to a taxpayer (other than a corporation) who has received at least $600 or more in non-employment income during the tax year. A non-employee might be an independent contractor, freelancer, or any person hired on a contract basis to complete work, such as a graphic designer, writer, or web developer.
The IRS requires these forms so they are aware of income being received by small businesses and individuals. Businesses must track payments made throughout the year and submit 1099s to businesses or individuals and the IRS by the end of January of the tax year following when the payment was made. For example, 1099s for payments made in 2024 need to be issued by January 31, 2025.
Start collecting those W9s now!
In order to complete the form 1099, businesses must collect a W9 form from each non-employee they pay at the start of the work relationship or contract. The W9 includes the tax payor identification number, name and address.
We recommend that you collect a W9 from any service vendor BEFORE you pay them. Waiting until January to try to collect these forms can delay the process of issuing your 1099s.
The IRS issues penalties for failing to meet the deadline.
Known as an information return penalty, it may apply if you don’t file information returns or provide payee statements on time or accurately. A penalty is charged for each information return you fail to correctly file on time, and for each payee statement you fail to provide.
The IRS will typically mail a notice if you owe a penalty and charge monthly interest until the amount is paid in full. For details, visit the penalty section of the IRS website.
Struggling to stay on track with your 1099s? Main Accounting can help.
As a service to our regular monthly clients, we collect W9s and issue 1099s by the IRS deadline each year.
Main Accounting Services specializes in increasing the success and profitability of growing law firms. Our mission is to empower law firm owners by providing insightful information, accurate and timely reports, and financial explanations that are individually customized to meet your needs.
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