It is that time of year…Small business owners all over the country are spending time gathering information from their vendors and independent contractors, confirming paid amounts, and starting the process of sending 1099-MISC forms. Did you know that you can avoid filing 1099-MISC forms by simply changing how you pay your vendors and independent contractors?
Using Cards or Third-Party Payers to Avoid Filing 1099s
When you pay your vendors and independent contractors via a credit card, debit card, payment card, or third-party payment network (e.g. Paypal), you do not have to file a 1099-MISC form.
Why? Since 2012, the IRS has required that card issuers and third party payment networks report this information using a Form 1099-K. This form, a result of the Housing Assistance Tax Act of 2008, was designed to improve IRS tax assessments and increase tax compliance from independent contractors. Thanks to the 1099-K, many small businesses are able to spend less time filing 1099-MISC forms.
Obviously, your vendors and independent contractors must be willing to accept these types of payments (and any fees that might go with them). Even if half of your vendors are paid through cards or third-party payers, this can result in a significant savings of time and money at 1099 processing time!
Avoiding Filing Time Headaches
This transition from Form 1099-MISC to 1099-K can be a little tricky. To make your year-end filing easy and free of confusion, follow this simple bookkeeping procedure:
When recording a credit card, debit card, or third-party payer payment to a vendor, enter the appropriate QuickBooks code in the “reference/check number” field.
At filing time, QuickBooks will recognize vendors with these payment codes and automatically exclude them from your 1099-MISC calculations.
Help Processing Your 1099s
Still not sure if you’re processing your 1099-MISC forms correctly? We’re here to help. Visit our website to get a copy of our FREE 1099 Guide.
Accounting and Bookkeeping Services in NH
Have additional questions about the 1099 filing process or need help managing your books? Contact the professionals at Fournier Accounting & Bookkeeping Services. Specializing in law firms and small businesses, we serve clients in New Hampshire and throughout the United States.