How to Pay 1099 Vendors

Sage 50 is well-appreciated by the business community all around the world for its amazing tools and features. It incorporated special features to help businesses while filing annual taxes as well. With this accounting software, you can do e-filing of the 1099 Forms with effortless ease. In this blog, we will discuss who are 1099 vendors, how to pay them and how to do e-filing of 1099 Forms through Sage 50.

What is a 1099 Vendor?

A 1099 vendor is a business or a person who performs some work for you but he can not be your employee. Such vendors are called so because they must receive an IRS Form 1099 from you if you pay over $600 to them per fiscal year. You can send the Form 1099 even if they are not paid beyond $600, just to keep your accounting books streamlined. Before making any such payments to 1099 vendors, you should gather all information about them so that they file 1099 forms properly during the tax time.

What are the Steps involved while Paying the 1099 Vendors?

Please follow the steps below to pay the 1099 vendors-

🔹 Step 1-  Ask for a signed W-9 Form from the 1099 vendor before starting to work with him. You may download this form through the IRS website. In the W-9 form, the vendor needs to fill up details such as his name, address, business name and employer identification number. If the vendor is working under his personal SSN (Social Security Numbers), he must provide the same as well.

🔹 Step 2- You must request an invoice from the 1099 vendor for every pay cycle. The invoice must include details such as the date of the service, the amount due for the services, the total bill for the purchase of goods, total billable hours and so on. It should also include applicable taxes or fees like shipping, handling etc.

🔹 Step 3- While paying the 1099 vendor, do ensure that you pay him with a check or electronic funds transfer. The check or the fund transfer reference number should note the invoice number or the transfer memo. As the 1099 vendor is not your employee, there is no need as such to withhold retirement benefits, worker’s compensation or other taxes.

🔹 Step 4- You need to send the IRS and the vendor a 1099 before 31^st January 31 of the year following the tax year. Use the information included on the W-9 form to complete the 1099. As you can find out, Form 1099 contains the taxable income earned by the 1099 vendor from you and this information will be matched by the IRS with that mentioned in the vendor’s tax returns.

What is the Procedure to e-file Form 1099 in Sage 50?

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