Download the full transcript PDF.

[00:00:00] Sarah: Welcome back for another great episode. My name is Sarah Karakaian.

[00:00:02] Annette: I’m Annette Grant, and together we’re–

[00:00:04] Both Annette & Sarah: Thanks for Visiting.

[00:00:05] Sarah: And this is the–

[00:00:06] Both Annette & Sarah: Hosting Hotline.

[00:00:07] Sarah: If you want to be a part of the Hosting Hotline, all you have to do is go to hostinghotline.com. Share your challenges. It’ll feel good just to get it off your chest. Record your voice. We’ll share it here on the podcast. If we don’t have the answer for it, we’ve been known to bring in our expert friends to help, and then everyone else will learn from the challenges you’re facing. It’s super helpful. This week, we’ve got a question from Cam.

[00:00:29] Question: Hey ladies, thanks so much for taking our questions. Love the podcast. My question is, when do I need to worry about 1099s, and who do I need to issue 1099s to as it relates to my hosting business? Thanks, again.

[00:00:43] Annette: All right.

[00:00:44] Sarah: Annette, please give our disclaimer.

[00:00:46] *** We are not CPAs. We have not read tax code. We are not responsible in any way, shape, or form. *** It’s not funny, but it’s true. 

[00:00:55] Annette: Yeah, no. So again–

[00:00:57] Sarah: But we know a thing about 1099s, I will say that. We have experience. We feel confident. 

[00:01:01] Annette: So right after the, *** We are not CPAs ***, we are going to give you our knowledge on 1099s. But number one, this is an excellent, excellent time to reach out to your CPA and start tax prep.

[00:01:15] Sarah: January is too late, y’all. 

[00:01:16] Annette: Yeah, they will be so excited that you are ahead of it, ahead of the game. It’s giving yourself some time before the holidays and the end of the year to tackle this stuff. We’re going to give you our broad knowledge that we do have because we do issue 1099s, and Sarah and I both have in multiple businesses for 20 years now. So again, consult with your CPA in your individual state, but we’re going to give you some of the blanket knowledge that we have.

[00:01:37] Sarah: So 1099s are– what is it? Non-employee compensation. 1099-NEC. And those are individuals who are not on your payroll. And not your payroll in terms of a blanket statement, but truly actual payroll. You do not issue them a W-2, but they perform services for you above $600.

[00:01:58] Really, the main point of a 1099 is that you are not withholding taxes from that person’s compensation. That’s why a W-2’d employee, you are withholding the compensation. So it’s essentially alerting the IRS that this person is earning wages or invoicing you for work done, and there haven’t been any withholdings. Right. And the magic number there is 600. So if you’re paying someone under $600, it’s just maybe a one-off, small situation. You don’t have to worry about this. But in our business, that’s related to something that is near and dear to our hearts, which is our cleaning team, our turnover team, our inspectors.

[00:02:37] If they are not your employees, you don’t issue them a W-2, you don’t withhold taxes on their behalf, then you need to issue them a W-9 when you first engage with them. Or if you haven’t done this yet, have them fill out a W-9. Quick tip. When I engage a new cleaner, and I’m bringing them on, and I’m really hopeful, maybe we’ve done a couple of cleans, and I feel really good about us having a good relationship, I will say, excellent. Here’s a W-9. As soon as you get that back to me, I will pay your invoice because I need this. Because you don’t want to be caught in January– 

[00:03:11] Annette: Chasing them around. 

[00:03:12] Sarah: Chasing them around. This also brings up a tough conversation that we actually talked about inside of our membership of, what if a cleaner doesn’t want you to issue a 1099, Annette?

[00:03:23] Annette: They probably shouldn’t be part of your team. It’s tough. I know we still live in a world where–

[00:03:30] Sarah: It’s complicated.

[00:03:31] Annette: People like to be paid with cash, and I know they’re in certain areas. It’s just difficult. For you as a business owner, that’s really difficult. You could say, I’ll withhold it and pay them less what you want to withhold for their compensation, but that is a tricky situation we are going to advise you to steer clear of completely, for sure. 

[00:03:51] And flip side of this, just FYI, let’s say you’re working with a company, a corporation. They do not need to be issued a 1099. You could still do it on the side of caution. So let’s say you use a larger, let’s say, nationwide HVAC company or plumbing company. Most likely, they probably don’t need to be issued a 1099, but I would just prepare them, send them out.

[00:04:11] It’s no harm, no foul. But definitely, this is the time to look through every service provider that you have and get those dialing because guess what? You’re going to be ahead of the game, and if they haven’t done this, they’re going to be bombarded come January. These are required to be turned in by the end of January.

[00:04:25] This is something that you don’t want to turn in late because you can get penalized for late filing. But here’s some encouraging words. You can do this on your own. You can file these online. I don’t want you to be intimidated. Your bookkeeper and/or CPA will charge you to file these if you ask them to, so you can do this on your own, but I would at least chat with them ahead of time. Let them know that you’re issuing them.

[00:04:49] Sarah: This is why it’s important in your books, whether you use QuickBooks, or Wave, or some online bookkeeping software, when you get a clean, you are probably going to market as some expense, however your CPA wants you to categorize it. But then I always add on there who that person is.

[00:05:06] And whether that person gives you their invoice via email, I’ll create a bill inside of our software and connect the two so that at the end of the year, I can just pull up and see how much I owe Susie on one report. This is why issuing the 1099 is very easy, because I can audit and say, I sent Susie this much, and so that’s what her 1099 should say that I paid her out. And it’s that easy, but it is our responsibility as operators and business owners to keep track of this and issue them on time.

[00:05:37] Annette: And if you’re issuing them, let’s say you have a virtual assistant. You have a reservation specialist. You have someone helping you with social media or your website.

[00:05:46] Sarah: All these people.

[00:05:47] Annette: All of them need to be issued one, not just people in your city or state. So this is something that you need to issue for anyone that is doing work for you. Again, overseas, I’m just going to say, talk to your CPA. 

[00:05:57] Sarah: I know that with today’s world of virtual assistants, overseas aside, virtual assistants within the US, different states have different things. So if you have a lot of virtual help from people outside of your state, definitely get the advice from your CPA on what to do with those. But it’s your responsibility.

[00:06:15] Do it now. It is a perfect time. Don’t wait too much longer. Start your audit now of all of your vendors that you have paid out this year, and start a running tab. That way, you’re not doing this [Inaudible] the holiday. You’re really relaxed. Start this work now a little bit so it’s not such a big thing in January.

[00:06:33] Annette: Inch by inch, it’s a cinch. Yard by yard, it’s really hard. How do you eat an elephant? One bite at a time. 

[00:06:41] Sarah: We can’t elephants. We’re vegetarians.

[00:06:42] Annette: I know, but isn’t that a saying too?

[00:06:44] Sarah: Yeah, but we no longer kill two birds with one stone. We feed two birds with one scone, Annette.

[00:06:50] Annette: You’ve been saying that lately, and I thought you were wrong. 

[00:06:52] Sarah: Because I got yelled at in our DMs.

[00:06:53] Annette: Oh, because we’re hurting animals?

[00:06:55] Sarah: Yeah.

[00:06:55] Annette: We love animals.

[00:06:56] Sarah: I know. 

[00:06:56] Annette: We’re pet-friendly. 

[00:06:57] Sarah: I know. 

[00:06:58] Annette: What the heck? 

[00:06:59] Sarah: I’m just sharing with you. The saying is different now, and we don’t eat elephants.

[00:07:03] Annette: I don’t think we should be feeding bird scones though, remember? 

[00:07:05] Sarah: We probably shouldn’t.

[00:07:06] Annette: We were just in Central Park, and Sarah and I were very upset with this woman that climbed over the fence with her children to feed them from their leftover lunch. She was feeding two birds with her scone, and we were not happy about it.

[00:07:19] Sarah: You know what? We just eliminate that saying all together. Before this episode gets too off the rails, I am Sarah Karakaian.

[00:07:25] Annette: I am Annette Grant. And together we are–

[00:07:27] Both Annette & Sarah: Thanks for Visiting. 

[00:07:28] Sarah: Talk to you next time.