Form 1099: NEW FOR 2023 FORMS FILED IN 2024

NEW FOR 2023 FORMS FILED IN 2024 – Most companies will be required to file information returns electronically. This requirement applies to companies that are required to file, in the aggregate, 10 or more information returns. Please refer here for more details.

It is that time of year once again, to prepare for the filing of information forms (Forms 1099) that are due by January 31, 2024.

Forms 1099 are required to be prepared by payers to report the various sources of income an individual or business may receive throughout the year, except for wages reported on Form W-2. Common 1099 Forms include 1099-NEC (nonemployee compensation), 1099-INT (interest), 1099-DIV (dividends), 1099-MISC (miscellaneous) and various other forms listed in the link below.

Click here to review a list of all forms and related filing requirements.

Businesses are required to report payments made for services equal to or in excess of $600 within a calendar year to any individual, partnership, or limited liability company on Form 1099-NEC. Generally, businesses are not required to report payments to corporations, but there are exceptions to this rule, which include payments to attorneys. Companies may be required to report accounting and legal fees, cleaning or landscaping services, consulting fees, and other various similar payments, in addition to contract labor. This requirement only applies to payments made during the course of trade or business.

Payments for rent, royalties, prizes, gross proceeds paid to an attorney, other income, and various other types of payments are reported on Form 1099-MISC. See the link above for a complete list of payments that are reported on this form.

As a general guideline, if your company has made a payment for something other than products, materials, utilities, and insurance to any of the entity types listed above, it’s important to always consider whether the payments should be reported on Form 1099.

Only total payments of $600 or more for the calendar year are required to be reported on Form 1099-NEC, although any amount of income is still taxable to the recipient. However, there are different thresholds for other forms, such as interest, dividends, and royalties. Some forms require reporting for any amount paid.

Only include payments that have been made during the calendar year. If a vendor invoices your company for work performed in 2023, but you do not pay them until 2024, the payment should be reported in 2024.

Any payment type subject to reporting on Form 1099-K such as credit card or certain payment apps does not need to be reported on Form 1099-NEC or MISC, as doing so will duplicate the income reported to the IRS for the recipient.

To prepare the forms, you will need the recipient’s full name, address, and their social security number or taxpayer identification number. It’s best practice to request that the vendor furnish that information on a signed and dated Form W-9 prior to remitting any payments to a new vendor. Having this information on file will make the preparation of the forms much easier in January, and you won’t have to spend time tracking down missing information.

Make sure your system reflects the name and tax ID properly. If the vendor is John Smith and his company is Acme, LLC but he lists his social security number on the Form W-9, be sure to issue the form to John Smith, not Acme, LLC so that the IRS can correctly match up the income he reports.

Most in-house software packages can produce the forms, and there are also third party and online options. We are happy to discuss the filing options available to you.

Forms 1099-NEC are due to the recipients by January 31 of each year, and the government copies should be mailed to the IRS or e-filed by that date as well. With a few minor exceptions, the rest of the forms in the 1099 series are due to recipients by January 31 and the IRS by February 28 (paper) or March 31 (electronic).

The IRS imposes penalties for failure to file information returns with the IRS on a timely basis as well as the failure to furnish returns to payees on a timely basis. In addition, the IRS may also assess penalties if a filer fails to include all the information required to be shown on a return (e.g., taxpayer's TIN) or reports incorrect information (e.g., incorrect dollar amount). Penalties also apply if a taxpayer files on paper when required to file electronically. Please note, that penalties have increased for returns due in 2024. Details on penalties are as follows:

• If you correctly file within 30 days of deadline: $60 per form ($630,500 max)

• If you correctly after 30 days and by August 1: $120 per form ($1,891,500 max)

• If you correctly file after August 1: $310 per form ($3,783,000 max)

The IRS reduces max fines for each tier to $220,500, $630,500 and $1,117,500, respectively for filers that are small businesses with less than $5 million in average gross receipts for the past three years.