As year-end approaches, it’s time for businesses to issue essential IRS forms like the 1099. While there are various types of 1099 forms, small business owners primarily need to focus on Form 1099-NEC and Form 1099-MISC. Here’s what you need to know to stay compliant and organized.
What is Form 1099-NEC?
Form 1099-NEC is used to report nonemployee compensation. It’s required for independent contractors who were paid more than $600 during the year. These contractors include individuals or entities that provide services to your business but are not employees (e.g., freelancers, consultants, and contract workers).
Exceptions:
- Payments to corporations (C corporations and S corporations) generally do not require a 1099-NEC.
- However, attorneys (whether operating as individuals or entities) must receive a 1099-NEC for services over $600.
What is Form 1099-MISC?
Form 1099-MISC is used to report payments for rents, royalties, and other specific types of income.
State-Specific Filing Requirements
While the 1099 forms are required at the federal level, don’t forget to check for state-specific filing requirements. Rules vary by state, so ensure you’re familiar with the regulations in the states where your independent contractors operate.
Key Filing Deadlines
- Form 1099-NEC:
- Due to the recipient and the IRS by January 31st.
- Form 1099-MISC:
- Due to the recipient by January 31st.
- Due to the IRS:
- March 31st (if filed electronically)
- February 28th (if filed by paper)
How to File Your 1099s
There are several options for filing:
- IRS Filing Information Returns Electronically (FIRE) system (free).
- Online providers such as:
By staying informed and proactive, you can simplify the process of issuing 1099 forms and ensure your business remains compliant. Whether you’re a contractor or a business owner, these steps will help you navigate year-end filing with confidence.
