The 1099 Issuer’s Responsibility

The recent change by the IRS to enforce the filing of 1099-Ks for income above $5000 is going to bring a wave. Businesses that have an accounting system and team in place, report their revenue accurately. Are micro businesses, solopreneurs and other contractors able to do so diligently, if they have not bothered to keep the accounting pillar up to date ? Then it is left between them and the tax preparer to sort out the revenue and expenses. A lose end. Especially challenging when businesses have a backlog of tax returns for a few years.

The 1099-K is going to face the same problem that 1099-NEC faces in the micro-business world. It is not the receiver’s problem. The receiver will report the 1099-NEC that they get. It will in fact make figuring out their income easier for them. Are the paying businesses fulfilling their responsibility to their Venmo, CashApp and PayPal contractors by tracking and filing the 1099-NECs ? Some have let this fall on the side and a diligent accountant’s advice is not heard at best and ignored at worst. The 1099-K problem will be multifold, for these organizations.

The receiver is ready to report it, but the sender business has a higher responsibility to get each contractor to fill in the W9, then file and issue the 1099s at year-end. Some micro businesses do not realize this and are not held accountable for NOT filing the 1099s. You can’t just pay by Venmo and forget about it. You have to track it and make sure that contractor reports the income that you reported. Enabling the contractors to be compliant is a responsibility of a business along with being compliant themselves.

Cloud based accounting software like QuickBooks Online will automate the contractor on-boarding and W-9s right from the beginning, keeping sensitive information secure and private, and there is no question of not tracking “lose” or “word of mouth” contractor payments, be it Venmo or PayPal or something else.

MORAL of the story: A business has a responsibility towards their ad-hoc contractors as much as towards regular W2 employees, and that is — helping them all stay compliant. Oh but wear your own oxygen-compliance mask first, is the key.