There is a special kind of air during the first part of the year. We, as a society slowly shake off our post Christmas/New Year’s malaise and start to panic (or get excited) about all the stuff that needs to get done in the beginning of the year. For most businesses, January is a time of expectations and reflections on the past year. However it is also a time of trying to account for who you paid and how much you paid them, and getting 1099s issued, because the IRS would like to make sure that all contractors are recognizing all their revenue and paying their taxes.
Who Should Get A 1099-NEC?
In this article I am specifically talking about two specific 1099s, 1099-MISC and 1099-NEC. Once upon a time both of these 1099s were combined into the 1099-MISC, but as we know, the IRS likes to make things more complicated, not less. The 1099-NEC is for non employee compensation in excess of $600. Also please note that corporations do not need 1099s and tax payers should not issue 1099s to these entities. A good example of a situation that would warrant a1099-NEC, would be if you had a office building and you paid a contactor to do drywall work that costed over $600. For the contract work, a 1099-NEC would be issued. But be aware when you fill out 1099-NEC, to make sure to include the total of the work, not just the amount above $600.
What About 1099 MISC’s?
Fear not humble reader, we at CPA Solutions have you covered. For 1099-MISCs, they should be issued to people you paid more than $10 in royalty income to. Or people/persons that you have paid more than $600 to in one of the following areas:
- Prizes and awards (not gambling winnings however, those are covered in 1099-G)
- Other Income Payments
- The cash paid from a notional principal contract to an individual, partnership, or estate
- Fishing boat proceeds
- Medical and health care payments
- Crop insurance proceeds
- Payments to an attorney
- Section 409A deferrals (409A is small business valuation)
- Nonqualified deferred compensation
Simply put, there is a little more that you have to contend with in 1099-MISC than in 1099-NEC. However most folks will be filling out more 1099-NEC’s than 1099-MISC’s, and most people 1099-MISC’s will be for rent payments.
When Are 1099s Due?
The IRS is funny in the sense that they seem to make everything incredibly complicated, and this is no exception. For 1099’s there are actually 3 due dates. First due date and the most important one is January 31st. This is the date in which businesses need to get the 1099s to their recipients. The next date on the list is February 28th (for 2021, date is usually the end of February). This date is when business need to submit their paper 1099s to the IRS. The final date you need to keep in mind is March 31st (again in 2021, but it is always the last day in March). This date is when you have to submit the electronic 1099 filings to the IRS. This may seem confusing to have 3 due dates, but in most cases it is best to try and have everything done by January 31st.
In conclusion 1099’s are pretty easy to understand. However for a lot of people they kind of fall by the wayside which causes unnecessary stress as the end of January gets closer and closer. Perhaps you are stressed about 1099’s at this very moment? If that is you, consider hiring a CPA to handle those for you.