Each year I get the question why should I file 1099’s? The fact is they are required by law. This form is often associated with independent contractors however it could also apply if someone repairs the plumbing or your computer.  Any time you pay an individual for services preformed for your business or rental property a 1099 may be required. If you paid them more than $600 during the year you are now on the hook to tell the government that you paid this money out. The reason; the IRS wants to be able to track who is receiving money with the goal of catching someone, somewhere under-reporting their income.

To be on the safe side it is always better to have each person you pay fill out a w-9 before they ever receive a check. This gives you the legal name, ID number and address. This ensures that you don’t get to the end of the year and find you have missing information and can’t find the contractor you had fix something for your business or rental.

If this person works for you on a regular basis make sure you actually have an independent contractor situation and not an employee. It is helpful to have a contract in place; they should also work for other people or businesses, set their own hours and determine how a project is going to be accomplished. This is only a few of the regulations. If you think you might have an employee instead of an independent contractor you are correct. Once that thought crosses your mind then more than likely you need to start the process of bringing them onto your payroll.