Please send in all 1099 information to our office no later than January 15, 2021, so we have enough time to process them before the deadline.
WHAT ARE THE 1099 FILING REQUIREMENTS?
As a general rule, you must issue a form 1099 to each person whom you have paid at least $10 in royalties and/or interest, or at least $600 in rents, services (including parts and materials), prizes and awards or other income payments.
HOW DO I KNOW WHICH TYPE OF PAYMENT WAS MADE?
Box 7 – nonemployee compensation – is the most commonly used box on the 1099-MISC form. This type of payment includes a total of at least $600 paid during the year to independent contractors and nonemployees. Box 7 includes payments for fees, commissions and prizes and awards.
Box 1 is for a total of at least $600 paid during the year for real estate, office space or machine rentals. The exception to reporting these amounts is if they are paid to a real estate agent or property manager.
Box 2 is for a total of at least $10 paid during the year for royalties stemming from the use of intangible property such as patents, copyrights, trade names and trademarks.
While these are the more commonly used boxes on the 1099-MISC form, there may be others that need to be reported elsewhere on the form. Feel free to ask us at FKCo about any kind of payment’s required tax reporting.
ARE THERE ANY EXCEPTIONS?
You do not need to send a 1099 to corporations or for payments of rent to real estate agents or property managers. Also, you don’t need to send 1099s to sellers of merchandise, freight, storage or similar items. Note: All payments for legal services of at least $600 annually require a 1099, regardless of whether or not the law firm is incorporated.
WHAT ARE THE PENALTIES IF I DON’T FILE?
The penalties for not filing 1099s can vary from $50 to $270 per form, depending on how late the forms get filed.
WHAT IS FORM W-9 AND WHY IS IT IMPORTANT?
One of the best business practices you can implement is to request a W-9 from any vendor you expect to pay more than $600 annually before you pay them. This will provide you with the vendor’s legal name, mailing address, tax ID number and the vendor’s tax classification. You can download a W-9 form here: http://www.irs.gov/pub/irs-pdf/fw9.pdf
WHAT ARE THE DEADLINES?
January 31st, 2021 is the deadline to electronically file 1099-MISC with nonemployee compensation (Box 7) amounts. January 31st is also the deadline to mail 1099s to their recipients.
All other 1099s reporting rent, royalties or interest need to be filed by February 28th, 2021, or March 31st, 2021 if filed electronically.
STILL NEED HELP?
FKCo is happy to help you by offering 1099 form preparation services.
If you would like us to prepare your 1099s, please contact our office or visit our website here: http://www.fkco.com/tax_resources/images/1099-Data-Input-Sheet.pdf for a blank 1099 data input sheet. If we prepared your 1099s last year, you will be receiving your personalized business email from us in the next few days.
HEADS UP: 2020 1099-NEC FORM
In the 2020 tax year, the IRS plans to use a separate form 1099-NEC to report nonemployee compensation, since Box 7 is so commonly used. This may shift 1099 filing deadlines a bit, so be on the lookout for any emails from us in the near future!