1099 Filling Requirements

Important Reminders for the 2020 Filing Season

The New Year is almost here (halleluiah, good riddance 2020!), and it is time to start thinking about 1099 filing. One of the most overlooked pieces of tax compliance is the filing of Form 1099-MISC.

For the 2020 tax year, a new form, Form 1099-NEC, is required to be filed for all nonemployee compensation payments. Other payments that are not non-employee compensation payments will continue to be reported on Form 1099-MISC.

Form 1099-NEC and 1099-MISC are not required to be issued for payments made personally; only payments made in the course of a trade or business require reporting.

In general, the rules formerly used for reporting nonemployee compensation income on Form 1099-MISC apply to Form 1099-NEC. Form 1099-NEC should be used by businesses (including sole proprietorships) and nonprofit organizations that pay $600 or more during the course of a trade or business for the following items:

  • Services of an independent contractor (including parts and materials).
  • Directors’ fees
  • Payments made to attorneys, including a law firm or other provider of legal services.
  • Fish purchases, for those in the trade or businesses of purchasing fish (and other aquatic life) for resale.

Your business is required to file a Form 1099-MISC with the IRS and provide a copy to each person or entity to whom you have made certain types of payments. The most common types of payments requiring 1099-MISC filing include the following:

  • Payments of at least $600 for:
    • Rents (Box 1 of 1099-MISC)
    • Other payments that do not fit anywhere else on Form 1099-MISC (Box 3 of 1099-MISC)
  • Payments of at least $10 for royalties (Box 2 of 1099-MISC)

Note, however, that payments to C corporations, S corporations, and LLCs treated as S corporations are generally not required to be reported on Form 1099-NEC or 1099-MISC, even if they meet the above conditions.

Please take the opportunity to properly identify those payments that may require Form 1099-NEC and/or 1099-MISC reporting and ensure you have all the required information on file. To gather the tax information of independent contractors or other noncorporate or legal service providers, you may use Form W-9. Additionally, now is the time to ensure that these payments are properly coded in your books or software to ease the stress during reporting time.

There are a few filing deadlines to be aware of, depending on the type of payment being made and how the form is filed. For the 2020 tax year, Form 1099-NEC and 1099-MISC must be filed by the following dates:

  • February 1, 2021, for any non-employee compensation payments, reported on Form 1099-NEC
  • March 1, 2021, for all payments on Form 1099-MISC, if the form is paper-filed with the IRS
  • March 31, 2021, for all other payments on Form 1099-MISC, if the form is electronically filed with the IRS
  • NOTE: both forms are required to be provided to recipients (payees) by 2/1/21

In order to correctly file your Form 1099-NEC and/or 1099-MISC, you will need the following information:

  • Name, address, and SSN/EIN of the payee
  • Total amount of payments made in each reportable box of the 1099-NEC and/or 1099-MISC

Penalties for failure to file Form 1099-NEC and 1099-MISC can be severe. Depending on how late the corrected filings are made, penalties per incorrect form can range from $50 to $270.

If you would like us to prepare 1099’s for your business in the upcoming tax year, please furnish the necessary information to us by January 15, 2021, so that we can be sure to prepare the forms in time to meet the deadlines.

Please note: if you are on the receiving end of a 1099-NEC or 1099-MISC, be sure to include it with the documents you send to us to prepare your tax return.