Accavallo & Company, LLC

Year-round Form 1099 & W-9 Compliance: Your Guide to Staying IRS-Compliant

Year-round Form 1099 & W-9 Compliance: Your Guide to Staying IRS-Compliant

As a business owner, staying compliant with IRS regulations is crucial to avoid penalties and maintain smooth operations. One critical aspect of tax compliance is handling Form 1099-NEC and Form W-9 for independent contractors. In this article, we’ll walk you through the year-round process of ensuring you meet these requirements, helping you steer clear of tax troubles.


Getting Your Tax Forms in Order


Step 1: Request a Completed Form W-9

The foundation of Form 1099-NEC compliance is ensuring you have accurate information from your independent contractors. On the first day of your working relationship, ask your contractor to fill out Form W-9, the Request for Taxpayer Identification Number or TIN. Payment should not be made until the W-9 is properly filled out.

Review the Form W-9 to confirm that your contractor is legally allowed to work in the United States as a resident or citizen. Look at Box 3 to determine the type of entity. Keep in mind that an S corporation or C corporation does not need a 1099. Additionally, if you make payments through a third-party payment platform, such as PayPal, you are generally not required to issue a 1099.

Step 2: Prepare 1099-NEC Forms

If you have paid more than $600 to an independent contractor, including parts and materials, within the past calendar year, you will need to file Form 1099-NEC. The filing deadline for this form is January 31st, unless it falls on a weekend, in which case, you have until the following Monday.

You will need to complete two 1099-NEC forms, Copy A and B. Copy A is filed with the IRS, and Copy B is sent to your contractor. Depending on your state, there may also be a state filing requirement.

For paper filing with the IRS, you must include Form 1096, the Annual Summary and Transmittal of US Returns. However, the IRS allows for electronic filing through the FIRE system. To do this, you’ll need a Transmitter Control Code (TCC), which can be requested by submitting Form 4419. This form must be submitted by November 1st of the year before you plan to file your 1099s.


Best Practices for Keeping Your Paperwork in Order

In addition to complying with IRS filing requirements, it’s a good practice to request invoices from your independent contractors and save them for your records. This documentation can be invaluable when it comes to tracking expenses and verifying payments made to contractors. Keep in mind that you don’t need business expense reimbursement reports because these are the contractor’s responsibility.


Penalties for Non-Compliance

Failure to issue 1099s by the deadline can result in penalties, ranging from $50 to $290 per form, depending on how long past the deadline the business issues the form. Avoid these costly penalties by diligently following the steps outlined above and ensuring that you’re consistently in compliance with IRS regulations.

In conclusion, year-round Form 1099 and W-9 compliance is essential for any business working with independent contractors. By following these steps and best practices, you can protect your business from penalties, maintain financial transparency, and ensure that you are meeting your tax obligations. Staying compliant with IRS regulations not only benefits your business but also fosters trust and transparency with your independent contractors.


If you need additional information or are in need of assistance with preparing forms 1099, please contact us at Accavallo & Company for further consulting, office at (203) 925-9600 or [email protected].


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Sherri Fisher is a Tax Manager at Accavallo & Company, LLC.  Sherri has longstanding expertise in Trust and Estate Taxation, Eldercare, and Estate planning. Sherri appreciates the relationships she has built with estate planning attorneys and advisors, to provide a team approach to assisting her clients. Sherri also has seasoned experience in business and individual taxation and is partial to assisting start-ups in developing overall accounting and operating plans.

Prior to joining Accavallo & Company, LLC, Sherri was a manager in a large firm, servicing high net worth trust clients, business, and personal clients. She was also a Partner in a large bookkeeping firm, which specialized in cloud accounting systems for regional and national companies. Sherri led a team in assisting clients to organize their accounting systems.  She is a graduate of Florida Atlantic University with a B.S. degree in Accounting.    

Sherri’s experience includes working with companies and organizations in a variety of industries including:

  • Investment Trusts

  • DAPT and Family Investment Partnerships

  • Estate and Probate Administration

  • E-Commerce

  • Manufacturing

  • Construction

  • Real Estate Investment

  • Marketing and Service-based industries

In addition to her professional accomplishments, Sherri is an Intuit Advanced Pro Advisor, Intuit Future Firm Advisory Board member, member of the Valley WIN Network, and proudly served as past Connecticut Public School liaison for the Yale Tommy Fund for Childhood Cancer. Sherri enjoys time with her family, Cleveland sports, thrifting and gardening.