If you paid your contractors via credit card or PayPal, those entities will report the income on a Form 1099-K. In short, you are required to issue Forms 1099-MISC if you paid a contractor via cash, check, or a bank’s quick-transfer system (e.g., Chase QuickPay).
The company I work for paid by credit card. Must I produce the 1099-K; or, will the credit card company provide that 1099-K?
They paid you by credit card? You do not prepare the 1099K. You receive a 1099K. Or they might give you a 1099Misc.
How do they pay you by credit card? Do they put the payment onto your credit card? Or they used their credit card and gave you cash or what?
How does your credit card company know WHO to send 1099s to? I haven't given them that information. Just curious. Thanks!~
When the vendor agrees to accept credit card payments, the vendor gives the credit card processor its information such as name, address, and tax id number. So it is not your credit card company that issues the 1099k, it is the credit card processor that issues the statement.
If you paid your contractors via debit card do you have to issue a 1099?
Yes, you have to issue your contractors a 1099-MISC for your payments to them if you paid them more than $600. How you paid them does not remove the requirement to file Form 1099-MISC
This contradicts what DeniseF1 said and is posted as the best answer. She said "If you paid your contractors via credit card or PayPal, those entities will report the income on a Form 1099-K. In short, you are required to issue Forms 1099-MISC if you paid a contractor via cash, check, or a bank’s quick-transfer system (e.g., Chase QuickPay)."
Which is true?
From 2020 Instructions for Forms 1099-MISC, page 2.
Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC.
Persons receiving credit card payments and payments from other providers like PayPal are already having those payments reported.
2020 Instructions for Forms 1099-MISC
This seems to support @DeniseF1
@george0w
Sometimes my client pays their vendor through PayPal and sometimes they pay that same vendor by check.
How to deal with year-end 1099 misc?
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You don't have to 1099 vendors where you are buying goods from them and getting a receipt. You issue 1099 forms to unincorporated contractors who do labor for your business. If they are paying the sub contractor by 2 different means of payment then they need to keep good records so they know what amount needs to be issued a 1099 and which do not. If you use a good bookkeeping program like quickbooks you can set up classes to differentiate the payments.
Hi, what if you paid the contractor in PayPal as a friend or family? Meaning, we paid the PayPal charges. Will PayPal also report that to the IRS?
Thanks. I understand about the vendors and keeping track of how they are paid. I now have a client who pays a professional consultant via a third party gateway. That gateway says no 1099K needed, so I assume I will use a 1099NEC.
If you, as a business, pay another business more than $600 in a year, you must issue a1099-NEC, regardless of the method of payment. Certain businesses are exempt, like S-corporations. You are required to give the contractor a W9 form, to collect their Social Security number or federal tax number. If they claim to be an exempt type of company, they will check the box on the form W9 and return it to you and you must keep that with your other business records for at least six years, in case you were audited, to prove why you did not issue a 1099 yourself.
(The rules about 1099-Ks apply if you hire a contractor via UpWork or Patreon and pay the intermediate company. If you pay the contractor directly, you must issue the 1099-NEC.)
You report the gross amount that you paid. If the contractor received less than the gross amount due to service charges or other fees, they will deduct that as an expense on their tax return.
"You report the gross amount that you paid. If the contractor received less than the gross amount due to service charges or other fees, they will deduct that as an expense on their tax return."
Hey, I have a question regarding this. We have an inner group in our company. Two of our managers have their own team. The payroll of their team is included in our regular payroll and I have been recording these payments as advances to the two managers (or dues). The agreement is we will deduct the payroll expenses from the commission payments of the managers. How do we handle the 1099s of these two managers and their team? which one is better (1) issuing 1099s to both team members and the managers (at the net) or (2)issuing the 1099s at gross to the managers and have them issue 1099s to their team members?
@MSD11_20 wrote:
"You report the gross amount that you paid. If the contractor received less than the gross amount due to service charges or other fees, they will deduct that as an expense on their tax return."
Hey, I have a question regarding this. We have an inner group in our company. Two of our managers have their own team. The payroll of their team is included in our regular payroll and I have been recording these payments as advances to the two managers (or dues). The agreement is we will deduct the payroll expenses from the commission payments of the managers. How do we handle the 1099s of these two managers and their team? which one is better (1) issuing 1099s to both team members and the managers (at the net) or (2)issuing the 1099s at gross to the managers and have them issue 1099s to their team members?
What kind of business is it? 98% of the time, a business is not allowed to issue a 1099 and a W-2 to the same employee. If the person is a regular employee, then all their compensation for work performed must be included on their W-2 and is subject to state and federal income tax withholding, employment taxes, unemployment insurance, workers comp, and anything else required by state or federal labor law. How you internally allocate funds between regular pay and bonuses really makes no difference--it's all wages to the employees.
oh just to clarify, the Managers are 1099s as well.
From June to October, they hired their team as a W2 then transitioned into 1099 this November.
@MSD11_20 wrote:
oh just to clarify, the Managers are 1099s as well.
From June to October, they hired their team as a W2 then transitioned into 1099 this November.
I don't feel comfortable about this situation. You can't "hire" an "employee" and then "transition your team" to the status of independent contractor, at least not legally. Whether a worker is an employee or an independent contractor is controlled by many factors and working conditions, and unless those factors and working conditions also changed, then the people may be misclassified, subjecting your company to substantial penalties.
https://www.irs.gov/newsroom/understanding-employee-vs-contractor-designation
Assuming the designation is legitimate, then who you pay depends on your relationship to the parties. Suppose you contract with Amy to perform a project for specified compensation. If Amy has the authority to hire whomever she pleases as subcontractors (Bob and Cathy), and Amy determines what parts of the project they work on and what they will be paid, or Amy could do the entire project on her own without help, then Bob and Cathy are Amy's subcontractors. You pay Amy the price for the contracted service, and Amy pays her subcontractors, whomever they may be. If the company contracts with Amy, Bob and Cathy to perform a project, then all 3 are contractors of the company, even if the company assigns Amy to be the project leader.
And, you really should have written contracts with all your contractors that already spells all this out. I suggest a legal review of the entire situation by a qualified tax attorney or enrolled agent.
Company paid for salesman’s (1099 vendor) vehicle repairs via company credit card. Can I include the charge on the vendor’s 1099?
It depends. If your company paid someone for at least $600 of the year, then your company needs to issue 1099 misc form, whether it was paid in cash, check, or credit card.
See, form 1099 Misc, for more information.
Paypal or credit card companies only have to issue a 1099-K on transactions over $20,000 or 200 transactions. The amounts over $600 but less than the threshold basically fall into a void. It's still reportable but know 1099 is issued.
Just a side note, it's not advisable to pay someone as a friend of family because you lose the protections paypal offers when buying goods or services if you don't do it as a business payment.
It has been my understanding that we shouldn't send a 1099 when a contractor is paid by credit card. The credit card processor is responsible for issuing a 1099-K.
I looked this up to verify and found these:
https://www.ericnisall.com/sending-1099-nec
https://www.irs.gov/payments/payment-card-transactions-faqs
Thanks.
The information from the IRS states clearly who must file Forms 1099-K with them for payments. It's not usually any individual.
Who Must File
Every payment settlement entity (PSE) or other party which submits instructions to transfer funds to the account of a participating payee, in settlement of reportable payment transactions, must file an information return (Form 1099-K) with respect to each participating payee for that calendar year. The PSE is business used as an outsource for collection of fees for various companies. The Form 1099-K is filed by the payment settlement entity.
This is not the same as Form 1099-NEC. See the Instructions here.
The PATH Act, P.L. 114-113, Div. Q, sec. 201, accelerated the due date for filing Form 1099 that includes nonemployee compensation (NEC) from February 28 to January 31 and eliminated the automatic 30-day extension for forms that include NEC. Beginning with tax year 2020, use Form 1099-NEC to report nonemployee compensation.
What is NEC?
If the following four conditions are met, you must generally report a payment as NEC. Then file that with the IRS and the payee.
You made the payment to someone who is not your employee.
You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations).
You made the payment to an individual, partnership, estate, or, in some cases, a corporation.
You made payments to the payee of at least $600 during the year.