Next month will be a stressful time for your accountant. After a brief moment of rest to enjoy the holidays, it all ramps up again full speed in January. There’s the fiscal quarter to close out (often the fiscal year too, for organizations whose finances follow the standard calendar year), audits to prepare for, emails to catch up on - and then thrown into all of that is Form 1099 preparation. With a due date of January 31, it’s a big project that must be completed both quickly and accurately. 1099s can’t be fully completed until after year-end, but there are some things you can do now to make life easier for your accountant when January rolls around.
Have a Plan
Before January, have a conversation with your accountant to nail down tasks and responsibilities. Who is responsible for filing the 1099s? How will they be filed? What is your internal deadline for submitting missing information? Nothing is worse than having an “I thought you were doing that….” moment on January 25th.
Review Vendor W-9s
We’ve said it before and we’ll say it again - it’s incredibly important to stay on top of your vendor W-9s throughout the year. Make sure you have a current W-9 from any vendor who could potentially need a 1099. (When in doubt, obtain a W-9 anyway - it does no harm and could save you a headache later.) Run a report in your accounting system to identify vendors who could possibly need a 1099 and double check that you have their W-9 on file. If not, follow up with the vendor now and thank yourself in January.
Start Preparing Known 1099s
Any applicable vendor receiving more than $600 in payments (or $10 in royalties) over the course of the year must receive a 1099. This amount is calculated on an annual basis; for example, If you pay a contractor $500 on January 1 and $200 on December 31, their total annual payments will exceed $600 and you must send them a 1099. Because of this, most 1099s can’t be prepared until after December 31. However, if you are certain that a vendor will not be receiving any additional payments before the end of the year, you might want to start preparing their 1099 now. Then you’ll be already be ahead of the game come January.
Set Up Your Templates
Depending on how you file your 1099s with the IRS, you may be able to start drafting a template before year-end. Different filing programs use different methods of entering information. At Altruic Advisors, we have an Excel spreadsheet template containing vendor data, which we upload to an online processing system. This allows us to create templates and begin entering data for our clients towards the end of the year. Then all we have to do is confirm any last-minute changes or additions before uploading the files. When you know January is going to be busy, it makes sense to do as much work as you can in advance!
If you’re confused about filing your 1099s, don’t hesitate to reach out to your nonprofit accountant or finance team. With a little preparation, the 1099 filing season doesn’t have to be a pain - for you or for your accountant!