How to Create and File 1099's Online as a Bookkeeper (and how to know who gets one)
How do I create a 1099? When do I send a W-9 out to contractors? How do I file 1099s online with the IRS?
These are common questions of bookkeepers in their client work. Creating, sending, and filing 1099s can be confusing because it depends on things such has how much the contractor makes, how they were paid, and what type of business they have.
Today I’m sharing a complete bookkeeper’s guide to all things 1099s.
Watch the video here, or keep reading!
What is a 1099?
A 1099 is a tax form from the IRS that shows income from the entire past year for contractors (if you're an employee, you'll get a W-2, not a 1099). As a contractor, you essentially work for yourself, you're not employed by a company, you buy your own equipment, and you set your own schedule. If you have your own bookkeeping business, you are most likely a contractor and will receive 1099s from your clients (this is also a service I offer to my clients where I can prepare their 1099s for any other contractors who work for them).
Who gets a 1099?
You need to know three things first:
How much was that contractor paid? - If they were paid more than $600, then they need a 1099.
How were they paid (the method of payment)? - If they were paid in cash, check, payroll service, or bank transfer, then they need a 1099. They don't need a 1099 if they were paid by credit card, debit card, or a software such as PayPal.
What type of business do they have (business entity)? - If they are an S-Corp, then they don't need a 1099.
What is a W-9 form?
A W-9 is an IRS form that the contractor fills out with their name, EIN and a couple other things (the info is used to fill out the 1099 in January). This should be collected from the contractor by year-end. You can download a W-9 form from the IRS on their website. The earlier you can get the W-9, the better. If you notice a new name in the books you're keeping for a client, that could be a trigger for you that maybe they hired someone new, and you can send them that W-9 right away.
What is the timeline for creating and filing a 1099?
Here is a suggested timeline for creating and filing a 1099:
Request a W-9 before the year end (as early as possible)
Confirm the amount paid to contractor (from Jan-Dec the tax year)
Prepare the 1099 (see video below for a quick tutorial)
Send the 1099 to the payees
File the 1099 with the IRS (before Jan 31)
Ensure approvals of 1099s (Feb-March)
Quick tip! Right inside QuickBooks, you could give any vendors a tag if they will need a 1099 for tax time, and you can pull a report at the end of the year with the income information.
Who pays the 1099 filing fee?
You can charge your clients for the filing fees if you'd like, but I personally just include it with my bookkeeping services because it's usually a fairly low fee.
What software do I use for 1099 creation?
Tax 1099.com, Tax Bandits, QuickBooks Online and Track 1099 by Avalara are just a few softwares you could use for 1099 creation.
In the past I've used Tax 1099.com because they were recommended to me (I share a tutorial at the end of this video). A few of you messaged me to ask about filing 1099s in QBO--so I think I'll try that out this year and report back on how I like it.
You'll put all the information for the 1099 into the software, including information about the client's business and the contractor's business. Right from that software, you can send it off to the contractor who needs to receive it. It seems a bit overwhelming if you've never done it, but it's actually pretty straightforward.
Related FinePoints Videos
1099s: how to create and file online - Creating, sending and filing 1099s can be confusing--it depends a lot of how much the contractor makes, how they were paid and what type of business they are. This video is a complete bookkeepers guide to creating 1099s.
How I work with accountants - with real questions that a client's accountant asked me (and how I replied).
Year-end bookkeeping tasks - Come along with me as I review a client's books at the end of the year.
8 reasons to add tax preparation to your bookkeeping services - In this video I talk reasons to do taxes, including: income, getting clients and seasonal work.
Quarterly taxes explained - How much to pay? When to pay? How to pay?
Other helpful resources
W9 Information from the IRS - About Form W-9
W9 Form - Download here
Determine how much you need to save for taxes with this free Tax Calculator
Interested in learning how to become a tax preparer to add to your services? Download this freebie: 6 Steps to Becoming a Tax Preparer
Want to learn the differences between a bookkeeper and accountant? Check out this free PDF chart
