What do I need to know about 1099s?
There are many types of 1099s all of which come with specific instructions for filing. The most common type is the 1099-NEC, also referred to as the 1099-MISC, that impacts payments to vendors for different services performed by people not considered employees of the company or other kinds of miscellaneous payments. Two important things to consider when getting ready to file a 1099 are what vendors must receive and what is the cause for including a certain dollar amount paid or what types of services were used. As a general guideline on deciding who should receive a 1099-NEC, consider if it is not a business or corporation and if they are not an employee, then they should receive 1099-NEC.
There are some exceptions that do not require a 1099-NEC, they include:
- Service fees paid to people considered employees
- Certain payments to corporations (legal services are different – those need to be reported)
- Payments for goods, telephones, freight, storage and other similar services
- Rent payments to real estate agents – although, the real estate agent must report the rent to the property owner with their own 1099-NEC
- Purchases made with a credit card – these payments will be reported to the IRS by the merchant card company in a unique form called a 1099-K
It's important to note that there are penalties that come with failing to file, incorrectly filing or filing late. We want to help avoid that and simplify the process for you. Here are things to consider when filing your 1099 this year or the next:
- Always have an updated W-9 file for every vendor you work with – this includes key information needed to determine if they require a 1099
- In this new digital world, the IRS is increasingly focused on electronically submitting 1099 forms, so consider using an electronic filing service to help save you time from printing and mailing forms. Baker Tilly Digital has a simple tool for you to use to get you started with automating this process.