1099 reporting comes every year, and it is compulsory for all US companies to complete in order to remain compliant. Those who do not complete it in full, or complete it inaccurately, are liable for heavy fines and penalties.
Each year, the 1099 reporting season can feel longer and even more complex, with annual changes in reporting processes, procedures and IRS forms.
Staying up to date with the latest requirements and processes can be hard so here is a quick guide to the essential information to help get you started.
- What is a 1099 form?
1099 forms are tax information forms that need to be completed for the Internal Revenue Service (IRS), reporting on any non-employment income for the relevant tax year.
Examples of non-employment income include receiving interest from a bank account, dividends, freelance work as an independent contractor, or unemployment benefits.
Each type of non-employment income requires a different version of the 1099 form to specifically report that income for tax purposes.
- Who should receive 1099 forms?
It is often the Accounts Payable Teams who are responsible for distributing 1099 forms to their reportable vendors.
Broadly, 1099 forms should go to all independent contractors (non-corporations) who receive more than $600 in non-employee compensation for business-related services or miscellaneous income payments, and payees receiving over $10 in royalties, dividends, or interest.
There are some exceptions to this rule, and you can find more information here.
- There are many varieties of 1099 forms
As of 2022, there are a total of 20 versions of the 1099 form. Here is a brief overview of the two most commonly used forms.
1099-NEC: Covering ‘non-employee compensation’. This form is used by payers to report on $600 or more paid in non-employee compensation for business-related services.
1099-MISC: Covering ‘miscellaneous’ income. This form is issued for reporting on non-employment income that falls outside the other 1099 forms. For example, money received from prizes or awards.
For a full list of I099 forms, visit the IRS website.
- I099 rules
IRS 1099 reporting requirements change annually – so it’s essential that you stay up to date. There can be changes to specific 1099 forms so you will need to learn how to complete the new forms to stay compliant.
Any changes to the reporting requirements can also affect due diligence and other processes within the Accounts Payable function.
The best way to stay up to date on the latest requirements is to invest in annual training for yourself and your team.
- Due dates for 2023
The deadline to mail 1099s to taxpayers is usually January 31st each year. But it is important to know and adhere to the cut-off dates for all the forms so you don’t fall behind.
Typically the 1099 reporting season begins from September onwards, so companies can comfortably work towards meeting the IRS deadlines at the start of each year.
For reporting on the tax year 2022, the deadline for 1099 forms is 31st January 2023. For more information visit the IRS website.
Become the 1099 Reporting Pro in your team!
With annual change from the IRS and the very real threat of fines and penalties for noncompliance, 1099 reporting is a high risk area for teams not to be competent in.
We offer on-demand training to fully equip teams with everything they need to know in under 3 hours.
Updated annually, this self-paced course and on-demand workshop provide comprehensive training to process the 1099-MISC, 1099-NEC and 1042 forms for your reportable vendors.
What You Will Learn
- Review of the 1099-MISC and 1099-NEC forms
- Which vendors are reportable, and on which forms
- Tips to make sure you are collecting all reportable income
- IRS filing requirements, deadlines, and penalties
We’re also running a live interactive workshop to guide you through the entire 1099 reporting process and provide the opportunity to ask questions which relate specifically to your business.
What You Will Learn
- A step-by-step process for IRS reporting that incorporates vendor processes, vendor master file maintenance and Accounting System/ERP tips to prepare throughout the year.
- Vendor Validations to help you file accurate data with the IRS and reduce the number of 1099 forms that are returned unmailable.
- How to determine reportable payees (vendors), which payments need to be reported on the 1099-MISC vs the 1099-NEC, and in which boxes.
- How to collect complete payee and payment data from other departments that make reportable payments, where only the reporting is handled by Accounts Payable.
- IRS due dates, late filing and penalties and strategies to reduce extra costs
Date: Thursday, November 10th, 1pm (ET)