For many businesses, one of the biggest year-end tasks is sending and filing 1099 forms by the January 31st deadline. Depending on how many contractors your business has used this year, and how organized you’ve been about keeping good records, 1099 requirements can become a big project that you don’t want to leave until the last minute. Start now by organizing all your information and collecting anything you need from your contractors.
Here’s a quick rundown of everything you need to know about 1099 requirements.
What is Form 1099?
Form 1099 is a tax form used to report non-employee income to the IRS. Businesses must issue Form 1099 to any individual or entity that earns at least $600 in non-employee income, although some 1099 forms have different thresholds (e.g., $10 for interest income).
Key points about Form 1099 requirements:
- Form 1099 reports different types of income, such as freelance payments, dividends, or interest
- The IRS uses the information on Form 1099 to help ensure that all taxpayers report their income accurately
- Businesses are responsible for issuing Form 1099 to individuals or entities to whom they have paid $600 or more in a calendar year for services rendered, rents, royalties, or other specified payments
Who do I need to send 1099s to?
You need to send 1099s to all vendors and contractors who are classified as a Sole Proprietor, LLC, LLP, or PC and to whom you have paid over $600 in the past year. You also need to include all attorneys to whom you have paid over $600, regardless of their business structure.
Next, look at how you paid your vendors. If you used a bank draft or check, you’ll need to issue a 1099. If you used a payment service (such as PayPal, Venmo, or even a credit card), that service will issue the appropriate form.
Types of 1099 Forms
There are lots of different versions of Form 1099, each designated for a specific type of income:
- 1099-NEC: Used for reporting non-employee compensation, such as payments to independent contractors
- 1099-INT: Sent to taxpayers who earned $10 or more in interest from a bank or investment account
- 1099-DIV: Used to report dividend income from stocks and mutual funds
- 1099-K: Issued by payment platforms or online marketplaces to vendors who receive more than $600 for goods or services (threshold subject to change)
- 1099-G: Sent to individuals who receive government payments, such as unemployment benefits or tax refunds
- 1099-R: Reports distributions from pensions, retirement accounts, or annuities
- 1099-B: Used to report proceeds from the sale of securities, such as stocks and bonds
- 1099-MISC: For miscellaneous income that doesn’t fall under other 1099 categories, such as prize money or legal settlements
- 1099-DA: Used to report transactions involving digital assets, such as cryptocurrencies, including capital gains and losses from their sale, exchange, or use in payments
You may also be interested in: Quick Cheat Sheet: Instructions for forms 1099-MISC and 1099-NEC
What information will I need for the 1099 form?
You need the legal business or individual’s name, the employer identification number (EIN) or social security number (SSN), and mailing address. If you collected W-9 forms from your vendors as you brought them on board, you already have this information on file. You also need to calculate the total amount you paid to each contractor or vendor during the calendar year.
We highly recommend collecting W-9s from your vendors before paying them for the first time. Make sure the forms are legible and signed, and update the contractor’s information in your accounting system. Taking this simple step when you hire a new vendor will save you lots of time in January.
When am I required to issue a 1099?
All 1099 forms must be filed with the IRS and postmarked to recipients by January 31st.
What happens if I miss the 1099 deadline?
The IRS charges a penalty for every late 1099. The penalty increases based on how far past the due date you file. You can find the latest return penalty amounts on the IRS website.
To avoid hefty penalties, file as soon as possible, and please don’t hesitate to reach out to our team for assistance!
Correcting errors on 1099 Forms
If you find yourself in the position of mistakenly reporting an incorrect 1099 to the contractor or IRS, it is important to address the issue as soon as possible to avoid any complications or penalties for you or your contractor.
What to do when you receive a 1099 that’s incorrect.
NOTE: Changes to QuickBooks 1099 Form delivery starting January 2025
Beginning in January 2025 (for the 2024 tax year), QuickBooks will no longer include the printing and mailing of 1099 forms in the subscription for QuickBooks Online Payroll and QuickBooks Contractor Payments. Here’s what’s changing:
- QuickBooks will now charge $4 per form to print and mail 1099s to vendors and contractors
- QuickBooks will continue to e-file 1099s and provide electronic copies to recipients as part of your subscription
What this means for you: Let your preparer know if you would still like physical copies of your 1099 forms. Remember, QuickBooks will still e-file 1099s and provide electronic copies.
For more detailed information on 1099s, you can refer to the IRS guidelines.
I need help completing Form 1099 requirements!
We offer three tiers of services to complete, file, and mail or email your 1099s. Use our 1099 preparation services to help you identify which vendors need 1099s and complete the process of filing and mailing the appropriate forms by the January 31st deadline.