Who you do not need to issue a 1099 to:

• Businesses that are incorporated*
• LLCs being taxed as corporations (you can find out how they are taxed based off their W-9)
• Businesses you pay with a credit card (where they will be subject to a 1099-K from their merchant service provider, PayPal, Venmo, ect. - where transactions are marked as 'business' transactions)
• Business you buy goods from

Who you do need to issue a 1099 to:

Anyone you pay:

• Who provides you a service who is not incorporated
• Rent to for business purposes who is not incorporated
  • ​The definition of rent includes office and warehouse space, storage rental and equipment rental

​Other things to note:

• The threshold for issuing a 1099 is $600 per year
• Lawyers should be issued 1099s even if they are incorporated so long as you paid them $600 or more*
• In case it's not obvious, anyone who you pay commissions to would also need a 1099

• If you are paying someone on behalf of a client, you must also issue a 1099 to any contractors you pay on your client's behalf
• Property managers who collect rent on behalf of their client (the landlord) must issue 1099s with gross rents showing in Box 1 to their client (the landlord)

Informational links:

• More detailed information about 1099-MISC not mentioned on this page can be found here
• PDF on how to classify independent contractors v. employees​ 

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Reporting New Contractors

California requires that you must report information to the EDD within 20 days of either making payments totaling $600 or more or entering into a contract for $600 or more with an independent contractor in any calendar year, whichever is earlier using form DE-542.

More information here 

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Foreign Contractors

The IRS requires that you report payments to contractors if they work in the United States and in some cases may require that you withhold from their payments.  Below are some links to additional information:

• https://www.irs.gov/businesses/small-businesses-self-employed/reporting-payments-to-independent-contractors
• http://jiahkimlaw.com/business/eight-things-know-hiring-foreign-independent-contractor/

Whether the contractor works in the United States or not, it is advised to get a W8-BEN form (link button below) from them when they start working for you.

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Forms to collect from contractors

These forms should be collected before you make any payments to any contractors

Domestic

W-9 Form

Foreign

W8-BEN

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Penalties

IRS

California

​A service-recipient may be charged a penalty of $24 for each failure to report within the required time frames, unless the failure is due to good cause. If the failure to report is an intentional agreement between the service-recipient and service-provider to not supply the required information or to supply a false or incomplete report, a penalty of $490 may be charged.

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Alpha can help!

Our 1099 services include:

• 1099 and 1042-S filings ($150/hour plus $6 processing fee per form)
• Reporting of new contractors to EDD ($30 per form)
• Electronic collection of W-9s ($2.50 per request)

Let us know if you need us to help you with any of the above.