1099 Mid-Year Planning

Mid-Year Check-Up for Annual Information Reporting

We are halfway through the year and we all know how quickly time passes after the summer. Below are the top five things you can do now to make your January 2025 information reporting process go smoothly.

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1. E-filing is required for most reports and forms

Most taxpayers are now required to file their information reporting forms such as 1099s and W-2s electronically.  If your business files 10 or more of any federal forms including Forms 1065 or 1120, 1098/1099, W-2, 941, 945, 940 and some others, this new rule applies to you.

There are three ways to file these forms electronically: upload directly to the IRS with a file generated by the software used to produce your forms, use a third-party service built into your accounting software (such as Aatrix), or use a third-party service online such as tax1099.com.

Take some time now to review your options for electronic filing and discuss with your software vendor if you are unsure of the features available in your system.  If you need to use the direct upload option and do not already have a current Transmitter Control Code with the IRS, we recommend you start the application process now as it can take 45 days or more for the IRS to process.  This link has more details on the process:  https://www.irs.gov/taxtopics/tc802

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2. Forms W-9

You will need completed Forms W-9 on file for the vendors you pay.  Vendors tend to disappear and stop answering calls in January when you are ready to prepare 1099s so we recommend the following as best practices:

• Obtain a signed W-9 when you are setting up each vendor in your system, before you issue a payment to them. Create a company policy that does not allow checks to be issued until the form is on file.
• Review the form to determine whether the vendor needs to receive a 1099 (corporations are exempt in most, but not all cases) and set up the vendor appropriately in your system.
• Make sure the vendor name in your system matches the W-9 (for example, don’t issue a form to Jimmy if the W-9 shows the name James).  The IRS will send mismatch notices if the name on the form doesn’t match their system.
• Keep copies of the Forms W-9 on file.

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3. Monitor for unusual transactions

Most payment reporting requirements such as non-employee compensation, rents, and interest are usually straightforward but occasionally your business might have a less common situation that could require 1099 reporting.  If you are unsure, contact us to discuss the payment ahead of time so you can prepare accordingly.

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4. Software settings and updates

If you use your accounting software to either generate the 1099 file for upload or link to a third-party service, make sure that you are on a current version that will work for filing 2024 forms. Contact your software vendor now to confirm compatibility and schedule and necessary upgrades before year end.

Review settings and reports in your system to be sure that all payments are being captured correctly, and that your vendors have tax ID numbers and addresses.

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5. Order forms early

When you are checking with your software vendor about any needed updates, also ask about whether you will need pre-printed forms and if so, what format they should be. Mark your calendar with a note to order the forms in November or December as vendors tend to run low in stock in January.

Feel free to contact us at any time for guidance or additional information on the above items. Some preparation work now will save you headaches in a few months!