The Who/What/When’s of 1099s:

 

Did you know there is a question on your tax return that asks if you filed 1099s as required by law?

As a business owner, it’s imperative you understand how to correctly answer that question.  You could face up to $600 in IRS penalties every potential 1099 you don’t file correctly (or at all).   

 

What is a 1099?

There are over 20 variations of the 1099 tax form.  The most commonly issued by small business are the 1099-NEC and 1099-MISC. Payments reported on these forms include:

• Independent Contractors or Freelancers: Payments of $600 or more made to independent contractors or freelancers for services provided.

• Rent Payments: Payments of $600 or more made for rent, typically involving commercial rental properties.

• Other Income Payments: Such as prizes and awards, commissions and bonuses not part of payroll, lawyers fees, etc.

• Merchandise, freight, or storage are exempt from reporting requirements.

 

Small businesses may also need to issue 1099-INT and 1099-DIV to report the payment of interest or dividends. 

 

Who gets a 1099?

In general, every vendor who receives payment for items above receives a 1099 unless they are a corporation.  However, many exceptions apply and it is essential for you as a business owner to collect W9’s from your vendors in order to determine who needs a 1099.

 

When are 1099’s due?

Filing Deadlines:

• To Recipients: January 31st.

• To IRS: January 31st for 1099-NEC; for other types, usually by February 28th if filed by paper or March 31st if filed electronically.