As we start the new year, it is time to prepare for the filing of your 2023 tax returns and complying with certain other tax reporting requirements.

Does your company currently hire or engage independent contractors, vendors, attorneys, or others to whom you pay non-employee compensation? If so, you may have to file form 1099-NEC and/or form 1099-MISC.

If you pay individuals, LLCs and LLPs that are not a C or S corporation payments of more than $600 then you are required to file and issue a 1099 to both the service provider and the IRS. Also, certain payments to corporations are reportable as well, such as payments for legal services. Failure to issue a 1099 can result in penalties.

In order to file a 1099 you will need to obtain a W-9 from the respective individual/business entity. In the event that the W-9 shows that the recipient is an individual/ sole proprietor or single member LLC you will need the individual’s social security number and not the EIN.

What types of payments are reportable on a 1099-NEC for?

A 1099-NEC needs to be issued for payments for services in the course of your trade or business. You may want to examine your expense payment records for consulting services, professional fees (including fees for legal services), repairs & maintenance, subcontractors, etc.

What types of payments do not require a 1099-NEC?

Examples would include payments for merchandise, utilities, insurance premiums, office supplies, payment of rent to real estate agents or property managers, wages, business travel, contributions to HSAs, IRAs, scholarships, and payments made with a credit card or payment card.

What are the 1099-MISC filing requirements? A 1099-MISC covers rent, prizes and awards, other income payments, any fishing boat proceeds, medical and health care payments, crop insurance proceeds, gross proceeds paid to an attorney (generally in connection with a settlement agreement), section 409a deferrals, and nonqualified deferred compensation that exceed $600 or royalties exceeding $10.

So, for example, if your company pays more than $600 in rent to a non-corporate landlord then you are required to file a 1099-MISC.

If you are filing a 1099-MISC it must be filed by Friday, February 28, 2024.

If you have any questions about your reporting requirements, please contact our Integrated Services Department and we will be more than happy to help you with your request.

More Information

Here is more information in this 4-minute video from Carrie Goodman about this important topic.