Small Business Tax Savings Podcast What Do I Need To Know About 1099-NECs?
With January fast approaching, it’s important for business owners to start preparing their 1099-NECs. If you want to stay ahead and get everything in order before the deadline, this episode is for you! We discuss whether or not a transaction needs a 1099, what the process for filing is, and what will happen if you missed filing a 1099.
[01:07] Fast Facts About 1099-NECs
- If your business pays a subcontractor or vendor, whether it’s an individual or a company, a total of $600+, you need to request a W9 so you can send them a 1099-NEC
- If you received a 1099-NEC as a contractor, you must report this income to the IRS
- Be it one-time or accumulative, as long as the total payment is over $600, you need to file a 1099-NEC
[04:05] When It Is NOT Required to File 1099-NECs
- Payments to C or S Corporations
- Employees
- Payments for merchandise, telephone, freight, or storage
- Payments to non-U.S. citizens performing work outside of the U.S
- Payments made via Credit Card or PayPal
[06:25] 1099-NEC Preparation Made Easy
- Step 1 – Collect a W9 from all contractors before you pay
- Step 2 – Fill out the 1099-NEC
- Step 3 – Send a copy of the 1099-NEC form to the contractor
- Step 4 – File a copy of the 1099-NEC with the IRS and State (if required)
- For contractors who are non-U.S. citizens - get an accomplished W8-BEN or W8-BEN-E instead
[08:54] Penalties for Failing to File a 1099-NEC
- 1099-NECs must be filed at the IRS and sent to the recipient by January 31st of the following year
- The fine will depend on how late you are
[10:16] Different Types of 1099s
- There are over 15 types of 1099 forms that are used for various purposes
[12:30] Final Thoughts
- Do that legwork now so you can get on top of the forms needed
- Utilize software to make processing and filing easier
Key Quotes
“If you are the one paying the contractor, you are the one that files the 1099-NEC.” - Mike Jesowshek
“Sometimes it's hard to get a W9 from someone after the fact so just ask for it upfront. Again, one rule of thumb before you pay anyone, collect a W9 from them.” - Mike Jesowshek
Resources Mentioned
- Blog Post: https://www.taxsavingspodcast.com/blog/what-do-i-need-to-know-about-1099s-for-business-owners
- Software: https://www.track1099.com/
- Downloads:
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