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Form 1099 Filing Requirements: Tips from FCA

As the end of 2022 approaches, every business owner should review their financials and determine which vendors and contractors will need to receive a Form 1099.  If your business rents its office space, then a 1099-MISC may need to be issued or a technology consultant may need to receive a 1099-NEC.

The filing requirements for both of these forms can be complex and confusing but there are a number of ways a business owner can facilitate their January informational return filing.

Tip #1 – If you are using desktop QuickBooks or QuickBooks Online, use the Vendor, Enter Bills, and Bill Payment functions.  This allows you to store Vendor information, keep track of unpaid bills, and more importantly allows you to generate a 1099 report.  This will automatically track cash payments to 1099 Vendors even if you are using accrual accounting.

Tip #2 – Form 1099-NEC and Form 1099-MISC report only CASH payments.  Be sure that you are not including amounts already reported in 2021 or to be reported in 2023.

Tip #3 – The threshold for filing 1099-NEC and 1099-MISC is $600 for Non-Employee Compensation and Rents.

Tip #4 – Request a completed Form W-9 before you pay the vendor.  A completed Form w-9 contains all the information you will need to file a 1099-NEC or 1099-MISC and documents that the Vendor’s certification is correct.  A blank Form W-9 can be downloaded from the IRS website.

Tip #5 – If the Form W-9 indicates that the tax classification for the entity is a C Corporation or an S Corporation, you do not need to furnish them with a 1099-NEC or 1099-MISC.

Exception – This does not apply to legal services.  Payments to a corporation providing legal services must still be reported on 1099-NEC or 1099-MISC.

Tip #6 – If your 1099 recipient fails to provide a tax ID number or furnishes an incorrect one, the IRS requires the business owner to begin Backup Withholding of 24%.  The compliance burden falls entirely on the business filer and requires the submission of Form 945 and regular deposits of the withheld taxes.  Unless the vendor or contractor is essential to your business; it may be better to find an alternative service provider.

Tip #7 – There are several exceptions to penalties and safe harbors to minimize these penalties, but failure to file due to “intentional disregard of the filing or correct information requirements” results in a penalty of $580 per information return.  It is essential that the business’s 1099s are filed in a timely manner.