While there are many types of “Information Returns” that businesses are required to file, the most common for our business clients are Forms 1099-NEC and 1099-MISC.
Filing Requirements for Form 1099-NEC
Generally, you should file a 1099-NEC form to report “Non-Employee Compensation” for all vendors that are not incorporated and to whom you’ve paid $600 or more during the calendar year. Your list likely includes individuals, partnerships, LLCs, LLPs, and some additional corporate entities.
Additionally, businesses must report on Form 1099-NEC:
Withholding of any federal income tax (report in box 4) under the backup withholding rules regardless of the amount of the payment.
Direct sales of consumer products of at least $5,000 to a buyer for resale anywhere other than a permanent retail establishment.
Do NOT include amounts paid to vendors via credit card or debit card in the totals reported on Form(s) 1099. The credit and debit card companies will already be reporting this income to vendors and to do so would be to duplicate information reporting.
Form 1099-NEC is due to be filed by January 31, 2022, to both the recipient and the IRS, for 2021 calendar reporting year.
Specific instructions for Form 1099-NEC can be found at www.IRS.gov/Form1099NEC
Remember: This requirement applies only to businesses. If you make these or similar payments as an individual, not a business, you are not required to issue a 1099.
Filing Requirements for Form 1099-MISC
Generally, you should file a 1099-MISC for all vendors that are not incorporated and to whom your business has paid $600 or more during the calendar year.
Form 1099-MISC is due to be filed by January 31, 2022, to the recipient and with the IRS by February 28, 2022, if on paper, or by March 31, 2022, if filed electronically, for 2021 calendar reporting year.
Note: An exception to the not incorporated general rule is for legal fees which require a 1099-MISC to be issued whether the vendor is or is not incorporated.
More specifically, other common payments that should be reported on Form 1099-MISC during the course of the year include:
- At least $10 in Royalties (Box 2)
- At least $600 in: Rental Payments (box 1)
- Prizes and awards (box 3)
- Legal Fees paid to an attorney (box 10), whether the attorney/firm is incorporated or not
Specific instructions for Form 1099-MISC can be found at www.IRS.gov/Form1099MISC
At SJG we can help you navigate thru the ever-changing tax landscape. If you have questions about your Form 1099 requirements or any other tax matter that affects your business, S.J. Gorowitz Accounting & Tax Services is here to help. See our last blog for information on Form W-9.