It’s Time to Process Your 1099’s
It’s January and the mandated 1099 filing season is upon us! If it wasn’t already complicated enough, now there are two 1099 forms that many business owners may have to file.
What is Form 1099?
In most cases, a 1099 is issued to report a payment over $600 made to a non-incorporated individual or partnership who performed a service for your business. You need not report if the work was done by an employee, valued at less than $600, or if payment is made via credit card or through a third party such as Paypal, Stripe or Square. Payments made through a third-party processor will be reported by them on a 1099-K.
The form most are probably familiar with is the 1099-MISC, but there is a newer form that began being used last season called the 1099-NEC. It’s important to know what to report on each. The 1099-NEC reports payments for those who are paid non-employee compensation as independent contractors, or businesses that are not an entity (sole-proprietors or partnerships, generally). The 1099-MISC will have all other compensation that you have reported in the past, other than what used to be in box seven non-employee compensation. Most filing this form will do so for box 1: Rents.
How to File Your 1099
The 1099-NEC is due to both recipients and the IRS by January 31st of each year. The due date for the 1099-MISC is January 31st for recipients, and February 28th on paper, or March 31st if you file electronically. If the deadline falls on a weekend, then forms are due the next business day.
To properly report payments, the W9 will need to be on file from each vendor letting you know their tax ID, address, legal business name, and entity type. After you have their tax information, the rest is easy! Simply enter into your accounting software the person’s name, address, and tax ID number (SSN or TIN). When it’s time to process 1099s, you can run a report of subject payments and process your forms. You can purchase paper forms from office supply stores, or electronically file using various software options.
If you find the task of reporting compensation on 1099-MISC and/or 1099-NEC confusing, my staff is ready to assist you. Reach out to us at 310-534-5577 or contact@abandp.com.
