Forms 1099 due January 31 – deadline quickly approaching

By Dustin Wielenga, CPA

*Post updated January 12, 2023 for new rules

Many companies, as well as individuals with business activities (including rentals), are required to file Forms 1099. This includes self-employed individuals, or individuals with rental properties. The filing deadline is as early as January 31 of each year, so it is important to act quickly.

What is Form 1099?

There are a couple of different Forms 1099. They are used to report payments made by a business to another taxpayer. The most common are Form 1099-INT (reporting interest), Form 1099-DIV (reporting dividends), Form 1099-NEC (reporting payments to non-employees) and Form 1099-MISC (reporting rents and other income items). Refer to the 1099 instructions “General Instructions for Certain Information Returns” for a more detailed listing of what is reportable. The forms are to be completed on a calendar year basis.

The most common form our clients must file is the new Form 1099-NEC (first applicable for the 2020 calendar year.) The following is not all inclusive, but provides a sense for items to consider.

  • Fees paid to a contractor in excess of $600 (a plumber, a web designer, a landscaper).
  • Fees paid to an attorney in excess of $600 (even if the attorney is a corporation).
  • Fees in excess of $600 paid to freelancers, vendors, consultants, self-employed individuals, etc.

Below is a list of some of the most common types of payments reported on Form 1099-MISC. The list is not all-inclusive, but should give you an idea of what is required.

  • Certain rents exceeding $600
  • Prizes and awards exceeding $600
  • Royalties exceeding $10

There is also 1099 reporting required for:

  • Interest on a business debt to someone (1099-INT)
  • Dividends or other distributions to a C – Corporation shareholder (1099-DIV)

Exceptions

There are a number of exceptions to the requirement to provide a Form 1099.

  • A Form 1099 does not need to be provided to a payment recipient whose Form W9 indicates they are taxed as a corporation (whether an S-corporation or a C-corporation).
    • This exception does not apply to payments made to an attorney. Payments for services to an attorney totaling more than for the calendar year $600 must be reported on Forms 1099 even if the attorney/law firm is taxed as a corporation.
  • Payments made with a credit card do not need to be reported on Form 1099.

When are the deadlines?

The Form 1099-NEC is to be filed annually by January 31. The Form 1099-MISC is to be filed annually by February 28 if you file on paper or by March 31 if you file electronically.

However, a copy of the Form 1099 must generally be provided to the payment recipient by January 31. Therefore, targeting a January 31st completion date is best-practice.

Penalties

The late filing penalty generally ranges from $50 to $500 per form. If a taxpayer has many forms required to be filed, then the total penalty can be hefty. Intentional disregard for the filing requirements can attract onerous penalty exposure. Additionally, taxpayers need to certify on their tax return whether they complied with the 1099 filing requirements. These tax returns are to be signed under penalty of perjury, so it is important for taxpayers to comply.

Filing with state governments

Normally the IRS would send the forms to the appropriate state taxing departments. Due to the new nature of the Form 1099-NEC, the IRS does not include it in its combined State and Federal filing program. Each state has its own rules regarding whether they require the Form 1099-NEC filed with them. Therefore, you would need to research the state filing requirements and determine if you need to file with them.

What should I do?

In order to complete any required Forms 1099, you will need to obtain a Form W-9 from the payment recipient. You will want to track down this information as soon as possible so that you can timely file any Forms 1099.

Many taxpayers take care of filing their own Forms 1099. If you have any questions about whether you should be filing any Forms 1099, or if you would like us to assist you with the filings, please contact us as soon as possible. The deadlines are rapidly approaching.

*Post updated January 12, 2023 for new rules

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