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Do I Need to File Form 1099 or Form W2?

January 15, 2020

Many taxpayers don’t realize that April 15th is not the first deadline of the tax season.

It’s actually January 31st. 

If you are an owner of a business or U.S. rental property you will need to file:

1.Form W2 for each employee that you paid during the year. There are very limited exceptions for filing a W2, so we recommend to file one for ANY employee you paid during they tax year.

2. Form 1099 for each contractor that you paid $600 or more in cash to during the year. Keep reading for more details on what ‘in cash’ means.

File a Form 1099-MISC for each independent contractor (non C or S Corporation) you have paid $600 or more by cash, check, or direct deposit during the year for rental-related services.

You do NOT need to file a Form 1099-MISC if you pay an independent contractor by an online service like PayPal, credit card, or another type of electronic payment.

For business owners, this includes payments to attorneys, website developers, bookkeepers, non-employee temporary help, etc.

For rental property owners, this includes payments to property managers, repair people, landscapers and anyone else who performs services for your rental and is not your employee. It makes no difference whether the sum was one payment for a single job or the total of many small payments for multiple jobs. (also see ‘Special Note…below)

Form 1099-MISC can be filed pretty easily online (if you work with a bookkeeper he or she can help). There are many websites that offer online filing. One that we have used and can recommend is efile4biz

Special Note for Rental Property Owners! Before the Tax Cut and Jobs Act (TCJA) passed at the end of 2017, we did not recommend rental property owners file Forms 1099, BUT the passage of this law created a potential 20% deduction for rental property income through 2025 if you can consider your rental(s) as a business (See our blog post on this here).

If you want to qualify for this 20% deduction you need to file Forms 1099 if required, as that is a requirement for business owners. That being said, if you know you won’t qualify for the 20% deduction and won’t be claiming it, you can likely skip the 1099 filing requirements. MY ADVICE? Just pay all contractors using a credit card, Paypal or other type of electronic payment and you won’t have to worry about Filing 1099’s at all!