Get started now on Form 1099-Misc and New Form 1099-NEC and avoid penalties
Tax season is almost here and, along with it, comes the requirement for businesses to send out 1099s. While this can be a tedious task – especially if you haven’t kept good records on your independent contractors – it is necessary so that you avoid penalties.
In the past, payments of $600 or more paid to non-corporate independent contractors and attorneys were required to be reported on Form 1099-Misc.
For tax year 2020, a new form, Form 1099-NEC, is required to be filed for all nonemployee compensation payments, formally box 7 on Form 1099-Misc. Other payments that are not nonemployee compensation payments will continue to be reported on Form 1099.
Form 1099-NEC and 1099-Misc
Form 1099-NEC is required to be filed with the IRS by February 1, 2021, using either paper or electronic filing procedures. The recipient is also required to receive Form 1099-NEC by February 1, 2021.
Form 1099-Misc is required to be filed with the IRS by March 1,2021, if you file on paper, or March 31, 2021, if you file electronically. The recipient is required to receive Form 1099-Misc by February 1, 2021.
Note that independent contractors include any unincorporated entity, including Limited Liability Companies (LLCs). Service providers such as accountants, and even some consultants, are LLCs and therefore must receive a 1099 from you.
Getting W-9s makes completing 1099s easier
To complete each 1099, you will need the party’s mailing information and Tax ID number. If you haven’t done so already, request that each of your contractors or vendors complete IRS Form W-9, which gives you this information. Retain the completed W-9s in your files.
Best practice tip: We recommend that you do not issue payment to a vendor until a properly completed and signed Form W-9 is returned to you.
Let KRS CPAs prepare your 1099s
Rather than guessing at IRS rules and requirements, why not let the KRS CPAs tax experts help? We will help you organize Form 1099 recipient data and prepare all the necessary forms for you to submit. Contact Kelley DaCunha at [email protected] or 201-655-7411 to get started.