Do you scramble at the end of the year getting 1099s together for all of your contractors? It’s a real pain isn’t it?
At Latchel we work with thousands of contractors so we know a thing or two about simplifying the process of issuing 1099s.
Here’s what you need to know:
Did you pay by check or credit card?
Starting in 2012, the rules around 1099 reporting changed. From that point forward credit card processing companies became responsible for reporting transactions made by card.
Here are the instructions in IRS Form 1099-MISC, the form you use for reporting payments to your contractors:
Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC. See the separate Instructions for Form 1099-K.
Here’s what this means: if you paid via card (whether it was debit or credit) you don’t have to worry about sending a 1099 to your contractors. If you paid via check or an ACH transaction, however, you may need to.
How much did you pay your contractors?
Reporting is required for any person (corporations are people, my friends!) you paid $600 or more to over the course of the year. Remember, this $600 only applies to people you paid via cash, check, or ACH transactions. If you used a credit or debit card the payment processor (i.e. Paypal, Stripe, etc.) is responsible for reporting under 1099-K.
What about the Latchel Contractor Network?
Latchel understands how time consuming it can be to handle all of the 1099 reporting requirements for contractors. That’s why we make it simple for any contractors sourced by Latchel and paid via the Latchel platform.
We have set up our payment platform and operation so that we take care of all of the 1099 reporting requirements, regardless of whether you pay via ACH or card. In other words, if you pay the contractor through Latchel, then we handle the 1099.
Makes things easier for you, right?
We don’t yet offer payments to your existing contractors through the Latchel platform. Until then, you’re still responsible for paying your own contractors and issuing them 1099s at the end of the year. If it’s a Latchel Contractor, then you’re good.
What if my accountants says I still need to issue 1099s even for card payments?
First, if you paid through the Latchel platform, we saved your accountant some time. No need to double-issue 1099s since we’re already taking care of it.
Second, I hate to break it to you, but your accountant is wrong. The laws are confusing, though, and there is a lot of mis-information out there. Kelly Erb, Forbes writer and tax expert explained in an article shortly after these laws went into effect:
Some tax professionals… have been advising clients since 2012 not to report certain transactions on a form 1099-MISC… But it’s clear that not all taxpayers, tax professionals and yes, even some in IRS, understand that to be the case. This, six years after the law was passed and two years after the law took effect.
In fact, sending unnecessary 1099-MISC forms to your contractors create unnecessary work for them and yourself. Since they’re already receiving 1099-Ks from the payment processing companies, the income is being double reported. They should be coming back to you asking you to remove any records that are already on 1099-Ks.