R&A CPAs’ Client Advisory Services team helps our clients to prepare and file timely 1099 forms each year. If we are not already working with you on your monthly and annual accounting, please call us to see how we can assist you. 

Following, please find relevant information for you as you begin to prepare and file copies of IRS Form 1099. These reports inform the IRS of several categories of payments made throughout the calendar year. Generally, businesses and self-employed individuals are required to file 1099s for many types of payments. Some of the common payments reported on a Form 1099 are payments of $600 or more for:

• Services
• Prizes and awards
• Rent
• Royalties ($10 minimum for royalties)
• Physicians or other providers of health and medical services
• Gross proceeds paid to an attorney
• Interest
• Dividends

In cases where the sum of all payments made to a person or business are less than $600 for the year, no 1099 is required. A Form 1099 is also not required to be issued to a business that is incorporated or a Limited Liability Company that is treated as a C or S corporation, unless it is for medical or legal services.  Payments only need to be reported if they are made in the course of your trade or business. Personal payments are not reportable. The IRS allows taxpayers to exclude from Form 1099-MISC and Form 1099-NEC any payments you made by credit card, debit card, gift card, or third-party payment network such as PayPal. (These payments are being reported by the card issuers and third-party payment networks on Form 1099-K.)

The best practice is to obtain IRS Form W-9 before payments are made to new vendors, and to contact each established recipient of these payments during the year and obtain an updated form from the business or individual. This ensures that forms are filed with any corrections or updates to the recipient address or other information. The Form W-9 also has a section where the business can indicate if they are incorporated, thus alleviating the requirement for a Form 1099 in most instances.

Introduction of IRS Form 1099-NEC

For 2020, there are substantial changes to the reporting process for nonemployee compensation. In prior years, nonemployee compensation was reported on Form 1099-MISC, along with other forms of payments including rent, royalties, and prizes. Instead of reporting nonemployee compensation in box 7 of Form 1099-MISC, as was done in 2019 and prior years, nonemployee compensation will be reported in box 1 of Form 1099-NEC in 2020. 

These forms are required to be sent to recipients and filed with the IRS by February 1, 2021 because January 31, 2021 falls on a Sunday. 

Form 1099-MISC

The general structure of Form 1099-MISC remains similar to prior years except for the removal of nonemployee compensation and a reordering of the boxes. Filing of a 1099-MISC is still necessary for rents, royalties, medical and attorney payments. Filing deadlines are as follows:

• February 1, 2021: Send to recipients
• February 16, 2021: Sent to recipients with data in boxes 8 and 10
• March 1, 2021: File forms with IRS (if filed on paper)
• March 31, 2021: File forms with IRS (if filed electronically)