....if you've paid your subcontractors through a third-party payment service.
If you wrote a check, paid with a debit card, or paid vendors through your bank's online banking system, that's considered a direct payment and you'll need to send out 1099's to your subcontractors by the end of January.
I stumbled upon a work-around a couple of years ago. We had only hired a handful of subcontractors, and our then-accountant was going to charge a hefty fee for the 1099s. So I looked into doing it myself and hit a roadblock. The problem was, I had paid them through Apple Pay. Huh? Turns out that if you pay your vendors by credit card, or use Venmo, Paypal, Zelle, Google Pay or similar payment services, the merchant is supposed to send out a 1099, and you are off the hook. This seems to be a little-known accounting fact, but I verified it with the IRS. I was told that in fact I should not be sending 1099s to contractors whom I had paid through a payment app.
In the video production services business, we regularly hire crew members on a freelance basis. Everyone production crew member that we paid more than a total of $600 for the year used to get a 1099. Now I make a point of paying all freelance camera people, audio recordists, production assistants, video editors, graphic designers and webmasters through a third party service. It's actually a win for all involved. The money is usually instantly available to the recipient, and we no longer have to deal with checks getting lost in the mail or accounting fees for 1099s.
I recently shared this info with an associate who remained skeptical. So I did a bit more research and found this terrific infographic from the folks at Accountingprose.com.
Follow the decision tree and see for yourself. Tax time is always stressful for us as a small business, and I've found this short cut helps me get the job done with just a bit less pain. Anything I can do to maximize my time working with clients to make great video programs is a bonus. Please leave comments if you find this info useful for your business as well.