Everyone likes to make money, especially the IRS. How do dealerships handle reporting small vendor services or other miscellaneous expenses to the IRS? The 1099!

New for 2020 and beyond is the new 1099-NEC or Nonemployee Compensation form. Traditionally, this amount was populated in box 7 of the 1099-Misc but now will have its own form moving forward. Other than the creation of a unique form, the requirements have not changed on what qualifies for reporting on a 1099-NEC. Let’s briefly touch on those below.

For starters, ANY business service over the amount of $600.00 or more in the calendar year to a specific vendor is required to be reported IRS. Common examples include 3^rd party contractors, cleaning services, or evening remodeling of the business office by a general contractor.

A good rule of thumb when contracting business services is to always request (or require) a W-9 Request or Taxpayer Identification Number form. The W-9 is a great way to protect you and your business by getting the basic information of the entity you are contracting with before work even begins. It will also give you all the information you need for a 1099-NEC! For example, sole proprietors, LLCs, and corporations (if they meet certain requirements) should also be issued 1099-NECs for services rendered. Obtaining a W-9 beforehand saves the headache of finding the information much later come tax time.

Did you know that S & C corporations can even be issued a 1099 under special circumstances? Payments towards healthcare or medical payments, payments made in lieu of tax-exempt interest or dividends, or payments made to an attorney all meet the requirements of for issuing a form. Remember this form is only for services for the business and never products or supplies.

A simple rule of thumb is, “When in doubt, issue it out.” The IRS will not penalize you for issuing 1099-NECs out needlessly. However, if you fail to issue a 1099- NEC or any 1099 for that matter, you could face needless fines and loss of revenue that is 100% controllable.

Deal Pack’s vendor tracking system automatically keeps a tally of amounts per vendor each year to take the guess work out of producing any type of 1099 for tax season. It will even produce a printed version for you!

To find out more about 1099s and how Deal Pack can handle these for your business please reach out to support at (800) 526-5832 or support@abcoa.com.