What is a 1099?
When people refer to a 1099, they are referring to an IRS form. It is a record of income paid to someone from a person or organization that is not their formal employer. The 1099 serves as evidence of income paid to a specific taxpayer for a given year. Receiving a 1099 does not automatically mean taxes are due for the income reported on the form – individual circumstances will dictate the tax burden.
What are the different types of 1099s?
The different types of 1099s are listed below. As a business owner, you will be most likely to encounter the 1099-MISC, the 1099-K and the 1099-NEC.
The 1099 K is what you receive from your merchant processing company if you accept credit cards.
There’s been changes to the 1099-MISC starting in 2020. This form used to be used for nonemployee compensation but that’s been moved to a new form, 1099-NEC. You’ll still use the 1099-MISC for other miscellaneous things like reporting rents, medical and health care payments, etc.
If you’re a contractor or freelance worker you’ll now be receiving a 1099-NEC instead of a 1099-MISC. So if you’re a freelance graphic designer or writer, expect to become familiar with the 1099-NEC. If you hire any freelancers or contractors yourself you’ll need to fill out a 1099-NEC if you pay them at least $600 during the year.
- 1099-A
- 1099-B
- 1099-C
- 1099-CAP
- 1099-DIV
- 1099-G
- 1099-H
- 1099-INT
- 1099-K
- 1099-LTC
- 1099-MISC
- 1099-NEC
- 1099-OID
- 1099-PATR
- 1099-Q
- 1099-R
- 1099-SA
The role of the W9
The W9 is a Request for Taxpayer ID Number and Certification. It is a formal document used to transmit tax information from the payee to the payer. The critical part of this document is that it contains the Taxpayer Identification Number (either SSN or EIN). Be sure to submit this document to any employee you wish to send a 1099, or if you’re an employee, make sure you’ve filled one out for your employer.
Compliance
The IRS imposes strict rules and penalties on improperly filed 1099s or intentionally disregarded submissions. The below chart shows the fines published by the IRS for Small businesses with gross annual receipts under $5,000,000. For full details, please visit the IRS website here.
|
Time returns filed/furnished |
Not more than 30 days late |
31 days late – August 1 |
After August 1 or Not at All |
Intentional Disregard |
|
Due 01-01-2020 thru 12-31-2020 |
$50 per return or statement – $194,500* maximum |
$110 *per return or statement – $556,500* maximum |
$270* per return or statement – $1,113,000* maximum |
$550* per return or statement – No limitation |
|
Due 01-01-2019 thru 12-31-2019 |
$50 per return or statement – $191,000* maximum |
$100 per return or statement – $545,500* maximum |
$270* per return or statement – $1,091,500* maximum |
$540* per return or statement – No limitation |
Who is required to file a 1099?
As with many government rules and regulations, ignorance of the law is never a valid argument. It is incumbent upon the business or business owner to properly follow the law, and the IRS is no stranger to shifting as much of that burden on to a company as possible. On the IRS’s website, it states, “If you made or received a payment during the calendar year as a small business or self-employed (individual), you are most likely required to file an information return to the IRS.”
How Gentle Frog Can Help
Gentle Frog offers a service to review your QuickBooks file and identify who might require a 1099. This whole process only takes about 30 minutes. We use a 3rd party service to issue 1099s called Tax1099 and we can guide you through the entire process.
Click the green button below to sign up for a free consultation.
2 Responses
Ok question so you can guide us to file 1099 will this include like 1099A 1099B 1099C 1099OID and forms that go with it like 1096 706 709 w-Ben
Hi Eduardo,
I’m sorry but I don’t understand the question. Gentle Frog does not file 1099s. If you need help filing 1099s I suggest you contact your CPA. If you have questions about specific 1099 forms you can search “IRS + the form name” to get the information directly from the IRS which is what we always suggest reading first.
-Jess