We’ve answered thousands of tax questions from founders since we launched. Here is a comprehensive guide that answers all of the most common questions founders have about 1099 filings for startups. If you have any questions or need help with 1099 filings Fondo would love to help!
Each year, beginning with the year of incorporation, if your startup paid any vendor that is NOT a corporation (i.e. is a LLC, Sole Proprietor, Individual, Lawyer, or Landlords) $600 or more, you need to file IRS Form 1099 with both the vendor & the IRS.
Why? When you pay these types of consultants/independent contractors/vendors, you do not withhold/pay payroll tax. One way the IRS knows these folks got paid is if you tell them via the 1099 they require Corporations (you) to file. The 1099 form also outlines to the contractor how much they were paid by you so they can file on their personal taxes
Your accountant should be able to help you with this or you can complete and file this IRS form. If you don’t have an accountant yet, Fondo would love to help you file your 1099s. Join 1,000+ founders who use Fondo and let us file your 1099s → our Special Deal Pricing to file your 1099s starts at $99.
1099s are an IRS form that you’ve got to get out to your vendors and to the IRS.
Each year, beginning with the year of incorporation, if your startup paid any vendor that is NOT a corporation (LLC, Sole Proprietors, Individuals, Lawyers, & Landlords) $600 or more, you need to file IRS Form 1099 with both the vendor & the IRS
1099 filings are due to your vendors and to the IRS by January 31st.
Each year, beginning with the year of incorporation, if your startup paid any vendor that is NOT a corporation (LLC, Sole Proprietors, Individuals, Lawyers, & Landlords) $600 or more, you need to file IRS Form 1099 with both the vendor & the IRS.
1099s are not required for the following:
If you paid the vendor from your payroll system, you can click a button from your payroll system to ensure they file for you. If you paid the vendor via ACH or Wire transfer you will want to file a 1099.
If you paid the vendor via PayPal or Upwork, you do not need to file a 1099 because PayPal will be doing that. If you paid the vendor via ACH or Wire transfer you will need to file a 1099.
To file your 1099s you will need a W-9 form from each vendor:
As best practice, most contractors will send you a W-9 when you start working with them - this contains their address, tax ID, Federal Tax Classification, and other important info to file a 1099. In order to file a 1099, a vendor must submit a completed Form W-9 to you.
You can feel free to use this Fondo template (or something similar) to request the W-9 form:
“Hello [insert vendor name],
In order to issue you a Form 1099 for tax year 2022, we need to collect a completed and signed Form W-9 from you.
Here is a blank template (link: https://www.irs.gov/pub/irs-pdf/fw9.pdf) of Form W-9 you can use to complete, download, sign and email back to us.
Thank you,“
The amount of the penalty is based on how late the filing is and how many 1099's are filed late and the size of your business. A "small business" is any business with gross receipts of $5 million or less. A large business is any business with more than $5 million in gross receipts during the tax year. The penalty for filing form 1099 less than 30 days late is $50 per form with a maximum penalty of $194,500 for small businesses and $556,500 for large businesses.
The penalty if you send in a form 1099 and file more than 30 days after the deadline but by August 1st is $110 per form with a maximum penalty of $556,500 for small businesses and $1,669,500 for large businesses.
Your accountant should be able to help you with this. If you don’t have an accountant yet, Fondo would love to help you file your 1099s. Join 1,000+ founders who use Fondo and let us file your 1099s → our Special Deal Pricing to file your 1099s starts at $99.
If you sign up and complete your onboarding by Monday January 16, we will ensure your 1099s are filed by the January 31 deadline.
This guide for informational purposes only and does not constitute legal or tax advice or create an attorney-client relationship. Companies should consult their own attorneys or tax accountants for advice on these issues. Because of the generality of the issues discussed in this piece, the information provided may not apply in all situations and should not be acted upon without specific legal or tax advice based on particular situations.
