Who Needs to Receive a 1099?
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Running your own retail store is undoubtedly a thrilling journey filled with fashion, style, and (mostly) fun things. But let’s face it – tax season can be a bit daunting. Today I’m here to talk to you about just ONE of your tax obligations as a business owner – filing & sending any required 1099 tax documents.
But what does that even mean? And who needs to receive a 1099?
In simple terms, a 1099 is a tax form that reports amounts you’ve paid to others, outside of employee wages. As a boutique owner, this could include payments to social media managers, models, photographers, virtual assistants, or really anyone you’ve hired for services. These would be reported on a 1099-NEC It also includes rent payments, even if it’s just renting a small space out in another’s storefront. This would be reported on a 1099-MISC.
Sending 1099s is your way of letting the IRS know that you paid certain individuals or businesses for services that THEY need to pay taxes on.
Essentially, you’re helping the IRS make sure these individuals & businesses don’t commit tax fraud, and that they report all the income they have earned.
So who needs to receive a 1099?
Just because you paid someone for rent or services during the year doesn’t automatically mean they need to be sent a 1099. There are a few other criteria that they must meet:
You paid them $600+ during the prior calendar year
You paid them via cash, check, ACH, or a personal payment processor (Venmo, Zelle, etc…)
They do NOT file taxes as a corporation (S Corp or C Corp)
If a vendor reaches the first 2 criteria, then you will need to request a copy of their W-9 to determine if they meet the 3rd one. You can send them a blank copy found here and ask them to fill it in and return it to you.
Be sure to keep their W-9 somewhere safe because you will need the information provided on that form to file their 1099 if they meet the criteria
The only exception to that last requirement is lawyers – they need a 1099 even if they’re taxed as a corporation. (Hey, it’s the IRS, they can’t make anything straight forward)
When do you need to file 1099s?
Mark your calendars, because the deadline for sending out those 1099 forms is January 31st.
When you file your OWN tax return to report your business income & expenses, you will be asked if you filed all required 1099s. If you say no, you could be charged fines. And, if you say yes if you really didn’t…well, that’s lying on a federal document…which is illegal. So don’t do that.
How do you file and send the 1099s?
There’s a couple different online software you can use to help you file these. I use one called Tax1099. Using a software will ensure the copies get sent to both your vendor & the IRS.
Otherwise, if you’re not comfortable doing this yourself, many bookkeepers & Accountants offer this for a small fee.
Congratulations, you’re now armed with the 1099 knowledge needed to tackle them like the boss you are! Remember, organization is your best friend, and staying on top of your bookkeeping records throughout the year will make this process easier for you!
If you ever feel overwhelmed, don’t hesitate to seek help from a bookkeeping or tax professional – we’re here to make your life easier.
Here’s to finding your own version of freedom,
Hi, I'm Megan!
Bookkeeping for the retail industry has some unique complexities that take extra time to manage to ensure accuracy. At Finding Freedom Financial Services, I provide done-for-you bookkeeping services for boutique owners that accurately track these complexities for you so you can have more time and focused energy to dedicate to running your stores. If you’re ready to get your time back, apply to work with me today!