What are 1099s and 1098s?
The IRS requires yearly reporting of income to service providers.. The most common form would be a Form 1099-MISC. These forms report income paid to unincorporated independent contractors, businesses, and individuals, whose pay does not count as wages. Here are some common reasons for use of a Form 1099:
You will need accurate addresses and federal identification numbers for all of the payees for whom you prepare a 1099 or 1098 form. To request those, send your vendor a form W-9 to complete. The W-9 form not only includes name, address and ID number, but also the type of business entity. If entities are incorporated or are LLC’s being taxed as S Corporations, you are not required to prepare 1099-MISC forms for them. Get these W-9 forms ASAP so you are prepared.
While not as common, Form 1098 is used to report interest paid on a mortgage. Lenders, by law, are required to provide borrowers with Form 1098s in order to report interest received from them This applies to first and second mortgages secured by real estate property. This, too, is a form that needs to be completed and sent before January 31st of each year.
Why You Need to File On Time
If you don’t issue these forms before January 31st, you could be facing serious consequences. This comes not only in the form of legal action, but fines, as well. This becomes particularly problematic for businesses engaging many contractors, or lenders dealing with a multitude of loans. You can be fined by each form, with a maximum of $500,000.00 a year. That can become quite the dilemma for small businesses! Not to mention, anyone receiving your forms might not qualify for things like social security and Medicaid. It is imperative that you send out your forms as soon as possible.
Don’t Wait--Hire a Bookkeeper
Anyone with multiple independent contractors or loans is going to find this task monumental. All the while, you’ll be expected to run your business at full efficiency. And, work doesn’t just stop so you can issue tax forms. The complexities of Forms 1099 and Forms 1098 go beyond what is able to be covered in one blog post. That’s why you shouldn’t hesitate before contacting a bookkeeper. By handing this task to someone specifically qualified, you can give your business the attention it needs, while comfortably knowing you won’t be facing any fines or legal action.
If you need a bookkeeper this year to help issue tax forms, Every Day Accounting can help! With over thirty years of combined experience, Cheryl and Kendra will be able to clean your books and properly prepare you for the beginning of tax season. Make sure you’re prepared.
Call 410-404-8157 to get started, or use our contact page to submit a request.