When it comes to managing 1099s and keeping everything compliant, it can get a bit tricky. We’ve put together a list of things that might answer specific questions you have about some of the nitty gritty.
Let’s get started.
- Nonemployee compensation is now reported on 1099-NEC instead of 1099-MISC. That is the only information reported on this form. It is due to both the recipients and the IRS by January 31, 2023 (regardless of filing method).
- 1099s should be issued for payments of $600 or more in connection with services provided during the course of a trade or business and should not be issued for purchases of products. They should also be issued for payments of rent.
- 1099s should be issued to the following entity types:
- Individuals and sole proprietors
- Partnerships
- LLCs taxed as a partnership
- Single-member LLCs
- 1099s do not need to be issued for the following entity types:
- C corporations
- S corporations
- LLCs taxed as either C or S corporations
- 1099s should be issued for the payment of legal services, regardless of the type of entity (i.e. includes legal providers which are incorporated – this is the only exception to the entity type rule)
- It is recommended companies receive completed W-9s from all vendors when they first start using the vendors. This will help them gather the appropriate information and save them from having the scramble in January to get the necessary info. It may also help reduce matching notices later from the IRS.
- In order to prepare Form 1099-MISC or 1099-NEC, we must have the following information:
- Full legal name of the entity or individual
- Federal ID number or social security number (NOTE: If dealing with a single-member LLC which has a FEIN, we must have the legal LLC name and the FEIN, rather than the individual name and SSN. Conversely, if dealing with a sole proprietor who has a business name, we must have the individual’s name and SSN, along with the business name.)
- Current mailing address
- Amount paid to recipient in 2022 and what type of payment (i.e. rent, non-employee compensation, etc.)
- The following payments should NOT be included in 1099s:
- Expense reimbursements
- Amounts paid to vendors via credit or debit card (these will be included in the 1099-K provided by the credit card processing company)
- In order to prepare Form 1098, we must have the following information:
- Full legal name of the individual
- Social security number
- Current mailing address
- Mortgage interest received from payer/borrower
- Outstanding mortgage principal as of 1/1/2022 (if originated in 2022, mortgage principal as of date of origination)
- Mortgage origination date
- Address of property securing the mortgage
- All 1099 and 1098 forms EXCEPT 1099-NEC must be filed with the IRS by February 28, 2023 (if paper filing) or March 31, 2023 (if electronically filing) in order to be considered timely
- If 1099s are not filed by the appropriate due date, they may be subject to penalties for late filing. These penalties range from $50 per statement (for up to 30 days late) to $270 per statement (if filed after August 1). The penalty for intentional disregard is $550 per statement.
Please reach out to us if you have any questions or need assistance on this matter. Time is of the essence, so reach out sooner than later.
Categories: Tax, Small Business
