Do You Need to Send 1099s?
IRS Form 1099-NEC, or Nonemployee Compensation, is a tax form used to report income that is paid to independent contractors or other nonemployees. This form is similar to Form 1099-MISC, which is used to report income paid to independent contractors and other nonemployees, but it is now used specifically for reporting nonemployee compensation.
The 1099-NEC form is required to be filed if a business or individual pays at least $600 in nonemployee compensation during the year. The form must be filed with the IRS and a copy must also be provided to the recipient of the income by January 31st of the year following the year in which the income was paid. It is important for businesses and individuals to properly classify workers as employees or independent contractors. Misclassifying workers can lead to penalties and fines from the IRS. Employers are responsible for withholding income taxes and FICA taxes for employees, but not for independent contractors.
It is also important to note that the IRS has increased penalties for failing to file correct Forms 1099, including Form 1099-NEC, so it is important to ensure that the form is completed and filed accurately and on time. Businesses and individuals should also retain copies of the forms for their own records. It is important for businesses and individuals to properly classify workers and to file the form accurately and on time to avoid penalties.
Have questions or need help preparing your 1099s? Reach out today so that you can file on time!