Working on business taxes? You may want to read our tax filing tips. If you work with independent contractors, you know that today is the deadline to mail out 1099-Misc forms. 1099-Misc forms are used to report payments of over $600 made to vendors for services (not goods). Typically, payments to corporations do not have to be reported, although there are a few exceptions. Copies of the forms, along with form 1096 must be furnished to the IRS by the last day of February. In 2011, the IRS started to require that third party payment processors, like Visa and PayPal, send out 1099-k forms to companies that use their processing services to receive payments. So, if you use one of these processors to collect payments you should expect to receive a 1099-k to help you complete your tax return.
Like many companies, you might also use credit cards or PayPal to pay vendors. This is where things become a little tricky. If you pay any of the vendors that you would normally supply with 1099-Misc forms using a third party payment processor, the IRS has instructed that you should not report those particular payments on form 1099-Misc. Since these payments are already reported on form 1099-k, reporting them on 1099-Misc results in the payments being reported twice. So, keeping that in mind, you should keep track of the way you are paying vendors throughout the year. Then, when it comes time to prepare 1099’s, you can easily sort the payments to see which were made by check and which were made using a credit card or PayPal. For more information visit irs.gov.