Reminders When Preparing 1099 Forms

1099 Form Tips for Tax Professionals

Many tax professionals prepare 1099 forms for our self-employed / small business owner / entrepreneur clients, and we generate some decent revenue from this service during January.

  • Sending 1099’s to subcontractors has never been more important than it is now, to protect the deductions our clients claim on their income tax returns.
  • However, preparing and filing 1099’s can be tricky sometimes. Painful errors can and do happen.

Here then are a few quick reminders to keep in mind when filling out and sending out 1099 forms for your self-employed / small business / entrepreneur clients:

  1. VERY IMPORTANT to develop a SIMPLE “information collection” mechanism for clients who DON’T WANT TO DO COMPLICATED STUFF. For example, request Form W-9 (filled out by subcontractor) and then ask the client to write the amount that the sub contractor was paid for the year at the top of the form, and only include amounts not paid by credit or debit card. The W-9 is then used to prepare the 1099-NEC.
  2. We are not supposed to include amounts paid to subcontractors by debit or credit card in the 1099-NEC amounts–those amounts are supposed to go on Form 1099-K, sent (if required) by the processor of those transactions. So for example, let’s say I paid my sole proprietor tax professional $2,500 for tax planning, and I paid it with my credit card. I am not required to send my tax professional a 1099-NEC for $2,500. Instructions for Form 1099-NEC here in case you’d like to view this for yourself. In practice, then, we may need to do some “separating” of payments made by ACH or check versus payments made by credit or debit card before issuing that 1099.
  3. Form 1099-NEC should be used for amounts paid for earned income (as opposed to the old 1099-MISC that didn’t distinguish between earned income and “miscellaneous income” not subject to Self-Employment Tax such as prize winnings).
  4. The IRS has a new, free system for filing 1099s, that’s here for you if you want it. Full disclosure: I haven’t used this system yet and have no idea if it works well or not! 🙂
  5. Any client who prepares 10 or more 1099s must e-file all 1099s (that’s new this year).
  6. “How much should I charge for 1099 preparation?” Tax pros seem to vary pretty widely on this, with many tax pros just including it as part of the overall service provided to business clients. For tax pros who decide to charge separately, $50 per 1099 is a number that we hear with some regularity.

We hope these reminders help you to enjoy a smooth start to your tax season, Andy!

Reminder, too, as we proceed through tax season that a Pronto Tax School Membership provides you with significant support resources in case you have questions or need help during tax season. We want to be the people who always have your back!

If you’re not already a Member, click here for Membership details.

And then here is a breakdown comparison of the support resources we offer in our two membership plans (Forever Edition vs. Dream Team):

If you have any questions about Pronto Tax School Membership plan options, and/or how to best utilize your membership benefits, please always feel free to contact our dedicated support team –> support@prontotaxschool.com or 310-422-1283

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Let's Make Sure We Direct You to the Right
Training for Your Needs!

Please click the button below for your primary tax credential.

Not sure which credential applies to your situation?  Click here to reach our support team and we'll help you decide.