It’s that time of year again, and FredCo is here to assist with year-end filings!
Did your business make any payments that would require filing Form(s) 1099 – MISC OR 1099-NEC? Here is some information that you should know and how FredCo can assist you with this.
1099 Filing Requirements
A Form 1099-NEC is used to report payments for services provided to your business by unincorporated vendors and independent contractors when those payments total $600 or more for the year. If a business needs to report other income, such as rents, royalties, prizes, or awards paid to third parties, it will use Form 1099-MISC. The IRS has established four conditions for payments that must be reported using Form 1099-NEC or 1099-MISC. All of the following four conditions must be met:
- The payment must be made to a non-employee.
- The payment must be made for services to the trade or business.
- The payment was to an unincorporated entity. (Note: All payments $600 or greater for legal services should be reported, even to a corporate entity.)
- The payment or payments totaled $600 or more for the year.
Required Information
In order to properly prepare Form 1099-NEC and/or 1099-MISC, you will need the following required information:
Payee’s name, complete mailing address, Social Security Number, or Employer Identification Number, total amount paid to the payee in 2024, and type of expenditure (generally rents, services performed by someone who is not your employee (including parts and materials), prizes or awards, payments to an attorney, or other miscellaneous nonemployee compensation).
The best way to obtain the required information from the payee is to have him/her fill out a W-9 form prior to you making payment for their services. Forms W-9 should be kept on file for all payees subject to Form 1099 reporting. If a vendor refuses to fill out Form W-9 or fills it out incompletely, he/she immediately becomes subject to a 28% backup tax withholding requirement on future payments. You can access a W-9 at www.fredcobiz.com under our “Resources” page – “Other Documents” to provide to the payee to complete.
Penalties for Failing to File
Penalties for failure to file correct information returns and/or furnish correct payee statements have increased and are now subject to inflationary adjustments. For 2024, those penalties range from $50 to $270 per information return. Businesses must send Copy A of Form 1099-MISC and / or 1099-NEC to the Internal Revenue Service with transmittal Form 1096 by January 31, 2025 and must furnish Copy B to the recipient by January 31, 2025.
What You Need to Do
FredCo Accounting Solutions is available to help you comply with the Form 1099 requirements. If we have filed your 1099s in the past and you would like us to file them for the 2024 tax year, you don’t need to do anything. We will take care of them for you automatically! If you are a new client in 2024 and would like our assistance, please let us know. All W-9s are required by January 15, 2025, to ensure your Form 1099s are processed by the January 31, 2025 due date.
Don’t hesitate to get in touch with our office if you have any questions or need additional information.
Sincerely,
Fred Zaytoun, President
