With so much to keep track of in your day-to-day operations, it is easy to overlook a very essential part of your end-of-year reporting – 1099s. Today, we are here to help you get a better understanding of your 1099s and even provide you with some solutions to make your reporting as smooth as can be.
Who Needs a 1099
Arguably, the most essential thing to know is who should receive a 1099 for the year. A business must issue a 1099 to any payee other than a corporation who receives at least $600 in non-employment income during the year. (Although there are exceptions to the $600 rule.)
Getting All of the Info Right
Another vital step before issuing a 1099, is making certain you have the correct TAX ID number as well as the correct mailing address, as the mailing address can be different than the billing address for many vendors. Throughout the year, we ask any new owners and vendors to submit their W-9s to us when onboarded. This process helps to cut down on time spent chasing down missing TAX ID numbers during the busy tax season.
One issue in the past has been that businesses may not fill out their W-9 correctly, which causes a TIN/Name mismatch. This can result in a possible penalty from the IRS after two years of incorrect information. This year, we at PetroLedger were able to implement the TIN Matching Program, which verifies the TIN/Name combination. This allows inaccuracies to be detected early, ensuring notification letters can be avoided. All of this helps get the forms out quickly and before the deadline.
Which 1099 Will You Need to File?
There are two main types of 1099s that we issue at PetroLedger, 1099-MISC & 1099-NEC. It’s important to know how they differ from each other.
- The 1099-NEC is used for businesses to report non-employee compensation in an amount of $600 or more. Some examples would be independent contractors, royalties, and attorney fees. If a service provider is incorporated as a C-Corp or S-Corp, you are not required to issue a 1099-NEC. An exception to this rule is law firms. Although a law firm may be incorporated, payments made directly to a law firm for legal services do require issuing a 1099-NEC.
- The 1099-MISC covers a multitude of other payments and is issued for any income that isn’t included on the 1099-NEC. Some examples would be settlement payments or gross proceeds to attorneys, rent, or other income payments.
Why Choose PetroLedger?
1099 processing is our most requested service from our clients. Our dedicated team of certified accountants stay on top of all of the changing federal and state regulations to ensure that you are always in compliance. You can also trust that in the rare event that something is incorrect (we are all human), that we will file the corrections on your behalf.
At PetroLedger, we begin our 1099 process during the last quarter of the calendar year, but January is our push month. During this time, our departments collaborate to verify all reportable drafts, checks and voids have been posted, and ensure that no errors are found. Once approved by the client, our 1099 department will print, mail, and file all 1099s electronically with the IRS before the January 31st deadline, all on your behalf.
By choosing PetroLedger to do your 1099 processing, you are choosing to save time, minimize your risk for error, and get your forms mailed out on time. Contact us today to get your 1099s in order!
Kimberly has spent 18 years in the oil & gas industry, starting small by helping part-time with her husband’s business as a Petroleum Geologist and small West Texas operator. Her responsibilities here at PetroLedger span the entirety of the accounts payable and joint interest billing needs for our clients. This has her coding invoices for oil & gas operators and producers, processing those invoices, keeping in contact with vendors and updating their information, as well as coordinating payment processing with clients.
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