Many restaurants rely on a combination of full-time and part-time employees, plus a variety of relevant independent contractors. The contractors that you hire for your business may include:
- Delivery drivers
- Repair technicians
- Freelance marketers
Any time that you pay independent contractors, it is important that you remember and follow the 1099 filing rules for restaurants and delivery contractors. Keeping in mind how software helps to keep small businesses compliant is also highly beneficial.
Advanced Micro Solutions’ 1099-etc accounting suite of tools is an affordable and customizable solution for businesses trying to improve compliance and efficiency.
The tax software features that you invest in now versus the ones that you purchase later should be your decision. A scalable system like ours gives small businesses who have a tighter budget more flexibility. The following guide will help to answer the questions that you may have when it comes to compensating and reporting your restaurant’s contractors.
Do Restaurants Need 1099 Filing Software?
The short answer is, most likely. If you pay for services from an individual or a company that the Internal Revenue Service would classify as an independent contractor, you must issue accurate forms to avoid any major IRS penalties.
Before you file a Form 1099-NEC to all applicable payees, you should keep in mind that failing to do so leads to:
- The IRS’ inability to verify all contractor income
- Underreporting for cash and gig work
- Minor or severe penalties (based on the specific context)
- Your business receiving a warning notice
There is no reason why you should need to do more work than is necessary. Software for 1099 reporting should make your job easier, not add unnecessary stress. An automated payroll and accounting system:
- Flags for users when a vendor requires a 1099 form
- Generates 1099 and/or W-2 forms without requiring manual spreadsheets
- Automatically tracks contractor payments for users
Getting an automated system and incorporating electronic filing is another great way to reduce avoidable errors. There is a less than 1% error rate for e-filed tax returns compared to 21% for paper returns.
Restaurant Delivery Contractors: Employees or Independent Contractors?
Before you start hiring and compensating your restaurant’s workers, make sure that you have reviewed the IRS’ common law rules for establishing who is an employee versus a contractor.
Independent contractors:
- Receive a 1099-NEC for services of $600 or more
- Must handle their own taxes
- Do not receive benefits from your business
Employees:
- Receive a W-2 form for their salaried compensation
- Are not responsible for withholding payroll taxes
- Get their payment through payroll software
The good news is, our software accepts payroll, non-employee compensation, and certain other 1099 information when you enter it by check throughout the year. Whether you hire independent contractors or employees, you will not need to invest in costly or hard-to-integrate programs.
If you still need help to determine common food delivery contractor scenarios, restaurants may encounter situations that lead to them using:
- Third-party applications (DoorDash, Uber Eats, Grubhub)
- In-house delivery drivers
- Local or seasonal delivery contractors
The easiest way not to get caught up with the forms that you need to send out is by knowing if a certain contractor gets paid by a platform instead of your business. We have you covered with a simple breakdown of who might be responsible for sending 1099 forms and for what reason.
What Do Restaurants Need from Delivery Contractors?
The most important thing that any employer can get from their independent contractor is a Form W-9. Gathering the form with all of the contractor’s essential information is better when you do it sooner rather than later. Scrambling at the last minute leads to potential errors on both sides.
The required information detailed on a Form W-9 includes the independent contractor’s:
- Legal name
- Business name (if applicable)
- Address
- Tax classification
- Taxpayer Identification Number (TIN or Social Security Number)
Distributing W-9s and applying the information is easy enough for small businesses to handle, but you should not need to spend extra time on manual filings. Using software that supports a business’s 1099 reporting requirements will help you to:
- Transfer data without entering it multiple times
- Securely store your documents with backup and restore features
- Eliminate year-end panic about missing data or information
Get Started with AMS Software
The 1099 filing rules for restaurants and delivery contractors may look different for each business. Download our free 1099-etc Demo software to see how our base W-2/1099 Forms Filer can operate alongside six optional add-on modules, which includes AMS Payroll. We support our software users in all 50 states, plus the District of Columbia and Puerto Rico.