In January, your company may need to send 1099s to certain individuals and some businesses. And you might receive a few. Learn about the common Form 1099 that companies send and receive.
TAX ID NUMBERS
All 1099s are called informational returns and require a tax identification number (TIN), which could be a Social Security Number (SSN) or an Employer Identification Number (EIN), depending on how the company is structured. Ask your vendors to complete Form W-9 before making any payments to them. This document provides all the information you’ll need for tax reporting, including company name, address, TIN and tax classification.
NON-EMPLOYEE COMPENSATION
Form 1099-NEC is the most common informational return, and it’s sent to anyone you paid $600 or more for services in 2021. This excludes employees who will receive a Form W-2 for their wages. A 1099-NEC is sent to sole proprietors, partnerships and most limited liability companies who worked for your business. Examples include independent contractors, janitors, attorneys, and anyone you paid who’s not on your payroll.
MISCELLANEOUS PAYMENTS
You may have made other reportable payments during the year that you’ll need to include on Form 1099-MISC. This may include rent, royalties, medical and health care expenditures or funds you paid to an attorney for a settlement agreement. But don’t include the attorney’s fees for the legal service and advice they provided. Those are reported on 1099-NEC.
CREDIT CARD PROCESSING
If your business accepted credit card payments during the year, you might receive a Form 1099-K from your merchant processor. However, if you use a third-party payment network like Paypal, they must provide one to you if you received more than $20,000 and had more than 200 transactions in the year.
CHECK THE CALENDAR
Generally, 1099s must be provided to the recipient by the last day of January with copies sent to the IRS by February 28 if filing paper forms, or March 31 if you submit them electronically. However, there is an exception for the 1099-NEC, which is due to the recipient and the IRS by January 31.