AAFCPAs would like to make clients aware that payments to non-employees, such as contractors and other service providers, in excess of $600 during the calendar year must be reported to The Internal Revenue Service on Forms 1099. If your organization hired consultants in 2023, paid dividends, or orchestrated an intricate debt structure involving a myriad of independent contractors, you could face potential penalties if 1099 filings are not submitted by their due date. While this may be managed by software applications or payroll providers, additional filings may be required for businesses that paid legal expenses or rent, offered prizes or awards, or made other 1099-eligible payments throughout the year.
Many organizations are not aware that 1099s are required for certain payments. To determine whether filings are required, AAFCPAs advises that clients perform an annual 1099 analysis. This analysis should begin in Q4 to ensure adequate time for the collection of missing W-9 forms and to ensure timely filing with the IRS. Organizations that do not file or that file late may be subject to audit and fines on a per-form basis.
When are 1099s due?
The most commonly filed Form 1099s are due as follows.
|Due to Recipient
|Filed with IRS
|02/28/24 (Paper), 03/31/24 (Electronic)
|02/28/24 (Paper), 03/31/24 (Electronic)
My company does not hire contractors. Am I still required to send 1099s?
If you paid rent or worked with a professional service provider or consultant, you will likely have a 1099 filing requirement.
What information will I need to file 1099s?
To file 1099s, you will need to know the recipient’s name, address, and Taxpayer Identification Number (TIN). This information must match the W-9 collected from the vendor and the information reported on their tax return. In most cases, you will also need to report on the 1099 total cash payments made to the recipient.
Do LLCs receive 1099s?
This depends. If an LLC files taxes as an S or C corporation, it does not receive 1099s. If an LLC files as a partnership, it does. Payments made to corporations do not need to be reported with the exception of legal services. You must report attorneys’ fees or gross proceeds to corporations that provide legal services.
What are the various types of 1099s?
There are more than 20 different 1099 forms. The most common include the following.
1099-NEC: This form is used to report non-employment compensation (NEC), i.e., payments for services performed for a trade or business by vendors that are not treated as employees, such as consultants, lawyers, and contractors. The 1099-NEC includes 12 boxes for various types of payments.
1099-MISC: The most common payments reported on this form include rent (Box 1), royalties (Box 2), and gross proceeds paid to an attorney related to a lawsuit (Box 10).
1099-DIV: This form is used to report dividends paid during the fiscal year.
1099-INT: This form is used to report interest paid by an organization or converted to principal.
What if payments were made through Venmo, PayPal, a payment app, or by credit card?
Payments made through Venmo, PayPal, credit card, or debit card do not require a 1099 filing by the payor. Instead, the IRS requires that payment settlement entities like Venmo report transaction information by issuing Form 1099-K. Vendors paid through their payment settlement platform should receive a 1099-K directly from the payment processor. Note that the IRS recently announced a delay in its planned $600 reporting threshold in 2023 and now plans to move to a $5,000 threshold for tax year 2024 as part of a phased-in implementation.
How We Help
Analysis, mailing, and filing of Forms 1099 occur at a time when most organizations are closing books, handling year-end, and enjoying holidays. Companies that might already be short staffed may find tax reporting and 1099 requirements especially challenging. AAFCPAs can conduct a comprehensive 1099 analyses to determine our clients’ filing needs. When filings are required, we can also process, mail, and file 1099s on your behalf to ensure accuracy, efficiency, and data security.
If you have questions, please contact Ashleigh Marks, CPA, Consulting Controller at 774.512.4136 or firstname.lastname@example.org, Nicholas M. Foresti, MBA, Consulting Controller at 774.512.4017 or email@example.com—or your AAFCPAs Partner.