The end of the year is here! Do you know if you should be sending out 1099s?
What is a 1099?
There are a number of different 1099 forms that report various types of payments you may receive throughout the year other than what a business might pay you. The payer is responsible for sending a 1099 to you.
A Form 1099 will have your Social Security number or taxpayer identification number on it, which means the IRS will know you’ve received money — and it will know if you don’t report that income on your tax return.
Simply receiving a 1099 tax form doesn’t necessarily mean you owe taxes on that money. You might have deductions that offset the income, or some or all of it might be sheltered based on the characteristics of the asset that generated it.
When You Might Get a 1099 Form
Some common examples of when you might receive a 1099 include:
If you earned $600 or more in nonemployee compensation for the year from a person or business who isn’t typically your employer, you should receive a Form 1099-NEC (the most popular type)
If you earned $600 or more in rent or royalty payments for the year, you should receive Form 1099-MISC
If you received a state or local tax refund during the previous year, you should expect to receive Form 1099-G
Additionally, if you paid a freelancer, independent contractor, or another nonemployee (W-2) $600 or more during the year (related to your trade or business) you likely should SEND them a Form 1099-NEC. Non-Employee Compensation payments below $600 don’t require filing the 1099-NEC, though the payer may still choose to do so.
If you’re an independent contractor, it’s not your job to file the 1099-NEC. But if you don’t receive a copy of the 1099-NEC from your client, you should follow up with them. Independent contractors will need to report all their income on Schedule C, even if it falls under the $600 range and there wouldn’t show up on any 1099s.
A 1099 MISC should be sent to each person if you have paid $600 or more for crop insurance proceeds, rents, payments to attorneys, and more.
Important Dates
If you’re the one sending 1099 forms:
Most 1099 forms are due to the recipient by January 31st.
If you’re mailing a paper form to the IRS, you typically must send the 1099 by February 28 (postmarked by that date).
Forms 1099-NEC are due to recipients and to the IRS by January 31 regardless of whether they are electronically or paper filed.
Corporation Rules
It’s rare, but sometimes an independent contractor will be registered as a C corporation or S corporation. You don’t need to file Form 1099 for a contractor registered as a corporation.
Freelance Marketplaces
Freelance marketplaces like Upwork or Fiverr don’t provide tax documents. Why’s that? Because they’re technically payment settlement entities. Businesses do not need to provide 1099-NEC forms to workers they hire on these platforms.
Notes
There are a plethora of other 1099 Form types (20+), but the MISC and NEC are the most common.
Beginning in 2020, the IRS chose to reintroduce the 1099-NEC Form as the new way to report self-employment income instead of using Form 1099-MISC. This was done partially to clarify that there is a separate filing deadline for nonemployee compensation from the deadlines for other payments that use Form 1099-MISC.
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