1099 Forms Explained!
Whether you are a self-employed contractor, vendor, or business owner, chances are you are not fond of these mysterious 1099 Forms. However, the IRS takes these forms very serious because they allow the agency’s computers to keep tabs on taxpayers as they match nearly all 1099s and W-2s (those are the wage report forms from your employer) against your 1040 and social security number. Recent Changes to Forms 1099
The most significant change to the Form 1099 in 2020 is the breakout of NEC from Box 7 of Form 1099-MISC to its own Form 1099-NEC. NEC still includes payments of $600 or more for services of nonemployees and attorneys, but these types of payments will now be reported in Box 1 of the new 2020 Form 1099-NEC. As such, starting with the 2020 forms, an organization should not report NEC on Form 1099-MISC. Payments of $600 or more for rent, prizes and awards, gross proceeds to attorneys, certain medical and health care payments and royalties over $10 should still be reported on Form 1099-MISC. Please note that the 2020 Form 1099-MISC has been modified accordingly to eliminate the input of a dollar amount into Box 7. In addition, please note that many of the other Form 1099 MISC Box numbers have been rearranged.
- Deadlines: These changes to the Forms 1099 have corresponding filing deadlines. The 2020 Form 1099-NEC is due to both recipients and the IRS by February 1, 2021, regardless of whether filing electronically or by paper. The 2020 Form 1099-MISC is also due to recipients by February 1, 2021; however, these Forms are due to the IRS by March 1, 2021 for paper filing or by March 31, 2021 for electronic filing. The IRS also modified the threshold for the required electronic filing of most information returns, such as Forms W-2 and 1099. The threshold remains at 250 or more forms filed for the tax year 2020, but drops to 100 forms in tax year 2021, and 10 forms in tax year 2022.
- Tax Payers: 1099 forms are used to report income that is potentially taxable to you. There are at least seventeen 1099 forms. You will receive a 1099 form in the mail if you received certain types of income during the year. Generally, you must report the income that is potentially taxable to you.
- Exceptions: The list is fairly lengthy, but there are some common reasons why you don’t need to send a 1099. Speak with Jeanine Hemingway for more information.
- Dividend and interest income: If you hold dividend stocks in your portfolio and received dividend payments during the year, be on the lookout for a 1099-INT & 1099-DIV form, which should list your dividend income. If you have money in a savings account or CD, you can expect your bank to send out a 1099-INT form listing the amount of interest income you received during the tax year in question.
- Gross proceeds from sales of stocks and bonds: If you sell any stocks or bonds, be looking for a 1099-B form. This will list each trade by date by investments. For those purchased after January 1, 2011, the costs basis may also be listed. If not, you will need to research your paperwork to calculate your basis.
- Withdrawal from Retirement account: Whenever you take money out of a retirement account, you’ll receive a 1099-R tax form showing your total withdrawals for the year. You can use this information to not only file an accurate return, but keep track of how much you’re withdrawing from savings. Not sure of various services that may require a 1099 Form? Here are some common types:
- Cleaning services
- Graphic Artists
- IT Support Services
- Web designer
- Administrative support
- Personal trainer
There are many varieties on 1099 Forms. Don’t ignore the income earned or sending a 1099 Form if you own a business. Meet with Jeanine Hemingway, CPA and make sure to finish up the process before the looming deadline. This could save you major penalties if you get caught not filing the Forms. Our experts can provide this service affordably and efficiently. Call today! Need assistance with, filing a tax return, preparing a tax return with a 1099 Form, or issuing a Form 1099, schedule a discussion today.