The IRS makes changes year after year to the 1099 filing process — adding additional stress to accounting teams’ year-end tasks during an already chaotic period. Between the introduction of new forms and changes to filing requirements, many organizations are struggling to file their 1099s properly and efficiently.
Here’s what you need to know:
Form 1099 is used by businesses to report compensation to non-employee individuals for services provided.
Per the IRS, generally, if the following four conditions are met, you must report a payment as non-employee compensation:
*Amounts paid to C corps and S corps do not require a 1099 EXCEPT for: (1) amounts paid to an attorney set up as a C corp or S corp for legal services, or (2) amounts paid to a medical professional set up as a C corp or S corp for medical services.
As of 2021, there are 20 varieties of 1099 forms. Below is a list of common forms and their most typical applications:
All 1099 forms must be furnished to recipients by January 31. All 1099 forms are due to the IRS by March 31, except for the 1099-NEC, which is due to the IRS by January 31.
You’ll need to resend the relevant forms to the IRS and resend the corrected form to the recipient.
Each form in the 1099 series carries different late-file penalties. Please see the IRS instructions for your specific form to understand more about the penalties.
No, do not enter all zeros for the recipient’s SSN. To avoid IRS penalties, it is highly recommended that you obtain a valid TIN before e-filing. You may request a TIN from the recipient by having them complete a Form W-9. If they fail to provide one, you’ll receive a form CP2100 from the IRS later in the year stating that you’ll need to withhold tax on all future payments at 24%.
Yes, for 1099-series you may file original IRS returns for previous years. If you need to do a correction, you may only e-correct prior years if you e-filed the original with Armanino that year.
A 1096 is the summary page for all 1099s that were filed. A 1096 is only required if the 1099 forms were paper filed with the IRS. If the 1099 forms are electronically filed, then a 1096 is not needed.
No, the IRS does not require the filing of a 1096 when all 1099s are filed electronically. If you e-file half of your forms and paper file the rest, then a 1096 will need to be filled out with the information for only the forms that were paper mailed.
The IRS has replaced 1099-MISC Box 7 with the new 1099-NEC form, starting in tax year 2020. Any wages formerly reported in Box 7 will now go into the 1099-NEC Box 1. You can also report federal tax withheld in Box 4 of the 1099-NEC. It’s due to the IRS by Jan. 31. (Here are the 1099-NEC instructions.)
Yes. The 1099-MISC still has all the boxes other than Box 7. The box numbers after Box 7 have just been shuffled around. Otherwise, the form is the same, it’s just missing non-employee compensation. Also, it is due to the IRS by Mar. 31. (Here are the new 1099-MISC instructions.)
No. According to General 1099 instructions, Part E, no 1096 is needed for e-filed 1099s. Neither is a W-3 required when e-filing, according to W-2/W-3 Instructions page 2, column 2 under Business Services Online (BSO).
1099-NEC and W-2 forms must be delivered to recipients by Jan. 31 and to the IRS by Jan. 31.
All 1099 forms, except 1099-NEC, must be delivered to recipients by Jan. 31 and to the IRS by Mar. 31. The 1099-NEC is due to recipients by Jan. 31 and to the IRS by Jan 31.
If the payment is for anything other than interest or royalty payments, the threshold is $600. If the payment is for interest or royalties, the threshold is $10.
No, in general, C corps and S corps do not require a 1099. Payments to individuals, LLC-partnerships, partnerships and sole proprietors do need to be reported on your 1099. The only C corps and S corps that do require the 1099 are those set up for attorneys or medical professionals for legal services and medical services, respectively.
If you filed your original form through an outside vendor, you’ll need to contact them to figure out the next steps for resending the form to the IRS and resending the email to the recipient. If you filed the form on your own, you’ll need to resend the relevant forms to the IRS and re-email the corrected form to the recipient.
The amounts paid to an attorney for legal services (evictions, contracts, etc.) must be reported on the 1099-NEC.
Payments to attorneys go on the 1099-MISC when the payment is a settlement payment due to litigation.
Incorrect. Attorneys are exempt from the corporation rule. All attorneys must be issued a 1099 if the payments are above the threshold.
No, if you pay an intermediary, the intermediary is responsible for sending the owner a 1099. If you pay the owner directly, then you do need to issue them a 1099.
Form 1042-S must be e-filed to the IRS and e-delivered or postal mailed to the recipient by Mar. 15, 2022. You may e-deliver if the recipient has a foreign TIN (Box 13i) or U.S. TIN. You can also postal mail to recipients.
Not necessarily. The IRS requires that the 1042 form be filed on paper and mailed manually. However, the 1042-S form, which includes the 1042-T, can be e-filed. So, you will need to work with your 1099 filing vendor if you want them to file your 1042 as well. If you’re filing both forms in-house, be aware that you can e-file your 1099 forms and your 1042-S but will need to submit your 1042 on paper and by mail.
The 1099-NEC doesn’t exist for prior years, so you’ll only use the NEC for tax year 2020 and going forward. The IRS now has two versions of the 1099-MISC. You’ll use the new version for tax year 2020 and forward, while using the old version for tax years 2019 and prior.
Please visit our 1099 Filing Service page for assistance with filing your 1099 forms.
