The IRS 1099 series forms allow you to report a wide variety of non-employee compensation and payments. They are used to control the taxes of ordinary taxpayers more efficiently. Do you frequently use the services of self-employed individuals or independent contractors? If that's your case, you'll most likely need to collect, summarize, and process 1099-NEC Forms before the IRS by January 31. In the past, the 1099-MISC Form was used for these purposes, but the rules changed.
Any business, regardless of its legal structure, from a single ownership to LLPs, LLCs, up to corporations, are required to inform the Internal Revenue Service (IRS) of certain types of payments to third parties that are not a regular part of payroll or employee workforce, through 1099 forms. The most commonly forms used are the 1099-NEC Form, in force since 2020 for "non-employee compensation" or compensation to non-employees and 1099-MISC Form for miscellaneous payments. Let's look at other key points you need to know about IRS 1099 forms.
It's a point that can bring confusion, but you should know that the1099-MISC Form has been used in previous years to report non-employee payments or compensation. However, since 2020, the IRS has included the 1099-NEC Form for the sole purpose of reporting and controlling better non-employee compensation, this means that payments over $600 made during the year to independent contractors and self-employed individuals will now have to be reported in this new 1099-NEC form, which in the past were reported in the 1099-MISC form.
According to Investopedia.com the 1099-MISC Form has been the most popular form to report non-employee payments or compensation, among the list of the 20 most commonly used forms in this category. The 1099-MISC Form still allows you to report miscellaneous payments up to the annual minimum of US$ 600 for items such as:
Download here our checklist of the most common 1099 forms
The above forms are not the only ones in the 1099 series. Since 2020, there are about 20 forms in this category. These allow you to inform the IRS of all kinds of payments, from the most common to the lesser known. Let's look only at the most common ones:
The common purpose of this series of forms is to validate the information provided to the IRS. The agency compares the income reported by the taxpayers on the income tax return form (1040 Form), to the information reported on the various 1099 Forms and similar ones.
Don't miss our post: The main reasons the IRS may flag your return to conduct an audit.
Since 2020, you will need to submit a 1099-NEC form for each contractor or self-employed individual you pay at least US$600 during a tax year. It will be necessary to send one copy to the IRS (copy A red) and another to the service provider or professional (copy B), before January 31 each year. In any case, companies can collect all 1099 forms issued, summarize them and process them electronically with the IRS. This is a mechanism for informing the IRS of income not linked to regular employment. You won't issue a 1099-NEC form to your employees, unless you don't consider them part of your payroll or see them as self-employed outside your job workforce. In general, you will need to submit a 1099-NEC Form for each "beneficiary" such as: lawyers, accountants, and service providers that are not corporations. If you still have questions about any transaction, operations or contract that generates non-employee compensation or payments to a third party, totaling $ 600 or more, it must be reported to the IRS via the 1099-NEC Form. The deadline for submitting 1099-NEC Forms is January 31 each year, without exception. For other 1099 forms, the date varies between January and February.
Any procedure before the Internal Revenue Service can be confusing or somewhat overwhelming to fulfill. If you have questions when filling or submitting IRS 1099 forms, the knowledge and expertise of GBS Group's specialized staff are available to support you.