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How To Avoid Late Fees for 1099-MISC & 1099-NEC

by | Sep 29, 2023 | Education

1099s are due January 31st, and I want to make sure you’re prepared and filed long before then so you don’t have to pay any unnecessary late fees.

So, let’s cut right to the chase. I’ll tell you everything you need to know about the who, what, when, and how with this skimmable FAQ list.

WHY SHOULD I CARE ABOUT 1099s?

Well, if you miss this deadline, you could end up paying more than +$200 in tax penalties and fines … or, at the very least, deal with the hassle of submitting an extension request 

WHO COUNTS AS AN “INDEPENDENT CONTRACTOR”?

  1. These are (1) workers and vendors that you contracted to do work for you, (2) you paid them more than $600, and (3) they aren’t on your payroll
  2. Guess what? That’s actually what the “NEC” stands for in 1099-NEC: “non-employee compensation”
  3. This includes vendors such as: copywriters, web designers, the cleaning company, your bookkeeper, your attorney, etc.

WHAT DO I HAVE TO DO? 

Figure out which of your vendors need a 1099-NEC by following these 5 steps:

  1. GET THE W9s – First things first, make sure you request and receive a W9 Form from each of your vendors that qualify (this could take WEEKS, so you need to start NOW). I encourage my clients to have these BEFORE paying anyone.
  2. SORT THEM BY ENTITY – This information will be on their W9 forms (which is why you need them!)  If they are NOT incorporated or they are LLP entities, you’ll need to issue a 1099.
  3. INCLUDE LAWYERS IN YOUR LIST – I know, this is a weird exception.  Just know that you need to issue a 1099 to lawyers no matter what their entity status is
  4. DOUBLE-CHECK HOW YOU PAID THEM – This could save you some work! For example, if you paid a vendor via your bank account (like with a check or cash), you’re on the hook and responsible for issuing them a 1099.  BUT – if you paid by PayPal or credit card, guess what? The merchant will take care of sending the 1099, and you don’t have to!
  5. ISSUE BY JANUARY 31 – Now you know exactly who you need to send a 1099-NEC to! And all you’ve got to do is send out and file 1099-NEC forms for each of them by January 31

WHEN IS IT DUE?

  1. The 1099-NEC forms are due January 31st
  2. But, again, you need their W9 forms first – and those can take weeks to receive from the vendors

OK – BUT WHAT ABOUT THAT OTHER FORM?  THE 1099-MISC?

  1. Remember how “NEC” stands for “non-employee compensation”? Well, the 1099-MISC covers the rest. 
  2. For example, the 1099-MISC is used to report things like rents or gross proceeds to an attorney (think settlement proceeds). 
  3. Basically, all of this used to be lumped together into one 1099 document (the 1099-MISC), but now it’s broken out into two separate documents (1099-MISC and 1099-NEC)

WHERE DO I GET ALL THESE FORMS?

  1. Need a W-9 Form?  Click here: https://www.irs.gov/pub/irs-pdf/fw9.pdf 
  2. How about a 1099-NEC Form? Click here: https://www.irs.gov/pub/irs-pdf/f1099nec.pdf 
  3. And for the 1099-MISC Form, click here: https://www.irs.gov/pub/irs-pdf/f1099msc.pdf 
  4. You can also file online using reporting software

AND WHAT IF I DON’T KNOW HOW TO DEAL WITH THIS AND NEED HELP?

Don’t worry – I help my clients with this exact filing all the time, and I’ve gotcha covered.  We offer consultations to help you determine who you should send 1099s to.

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