Small company Tax Tips - I Forgot to Send Out 1099's by January 31 - What Do I Do Now?

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Are you a small company owner who hires independent contractors? If so, you may be required by the Irs to send out a Form 1099-Misc to those people. This narrative will help you decree your obligation to issue those 1099's.

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The basic rule works like this: Form 1099-Misc is used to narrative total yearly payments made to self-employed population who made at least 0 during the previous calendar year. This 1099 must be given or mailed to the undertaker of a package deal by January 31 of the following year.

Note: For calendar year 2008, since January 31, 2009 is a Saturday, the deadline has been extended to the next company day (Monday, Feb. 2, 2009).

The key here is whether or not the person who worked for you is self-employed. Obviously, this excludes employees. If you have employees, you give them a Form W-2 by January 31 (or Feb. 2) to narrative their payment (wages, salaries, bonuses, and withholdings). And this also means you don't have to send out a 1099-Misc to corporations who in case,granted services to your business.

The purpose of the 1099-Misc is similar to that of the W-2, but the goal here is to narrative income made by non-employees, not employees. And this is why the yearly total income of self-employed contractors is reported in Box 7 of the 1099, "Nonemployee compensation."

In other words, the Irs is expecting you to provide a way to help them track the income of the self-employed. Does all income earned by sole proprietors get reported on 1099's? Of policy not. Who knows how much is unreported. And self-employed population know that if they don't get a 1099, it's difficult and approximately impossible for the Irs to figure out how much income a single self-employed person made. And so many self-employed population take advantage of this situation and only narrative income if they get a 1099.

And so there are many self-employed population who make abundance of money but receive no 1099's, and narrative no income, even though the law says they are supposed to narrative the income whether or not they receive a 1099.

But back to you, the company that paid the money to the contractor. Do you categorically want to be part of the hidden economy? If you take a deduction for payments to independent contractors but don't issue the corresponding 1099's, and you get audited, you are asking for trouble. Don't go there. Do the right thing and issue the 1099's.

What if the January 31 (or February 2) deadline has already passed? Go ahead and issue the 1099's anyway. Give the undertaker of a package deal a call right away and tell him you are sending him a 1099 as soon as possible. Why not do the right thing?

For details on how to comply with the 1099 reporting rules, download the Form 1099 instructions from the Irs website or consult with your tax professional. You'll want to send Form 1099-Misc Copy B to the self-employed person right away and Form 1099-Misc Copy A, along with Form 1096, to the Irs by March 2, 2009.

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