Fall is officially here, and it is time to start thinking about end-of-year tax planning which includes form 1099s. The IRS requires these forms to be issued by a taxpayer engaged in a trade or business when they make payments to others engaged in a trade or business.

The most well-known form 1099 are 1099-NEC and 1099-MISC:

  • 1099-NEC: for payments made for services (not products) to a non-employee.
  • 1099-MISC: commonly issued for rents, royalties, other income, prizes/awards, medical and healthcare payments, and gross proceeds paid to an attorney.

In general, these forms are issued if payments to a vendor exceed $600, are not paid to a corporation (with a few exceptions), and payments are made with cash, check, or bank transfer. Other 1099 forms include (but are not limited to) 1099-INT, 1099-DIV, 1099-B, and 1099-S.

Form 1099-NEC must be e-filed with the IRS and postmarked to recipients by January 31 of each year, and form 1099-MISC has a deadline of February 28 of each year. The IRS assesses steep penalties for non-filing:

These penalties are per form and duplicated if you fail to file with both the IRS and the recipient. This could quickly become a costly mistake if forms are not filed accurately and on time.

Preparing & Filing 1099s

It is not required to use an accountant to prepare and file form 1099s. If you decide to prepare them yourself, you should understand the filing requirements, research software options, obtain paper forms, and confirm the vendor information you have on file. You may also need to consider if the forms must be filed with a state tax agency.

Additionally, the IRS now requires that if you have ten or more information returns you are required to file electronically. An information return includes but is not limited to the following forms: 1099 (any type), W-2/W-3, W-2G, 1094/1095-B/1095-C, and 1098 (any type). For example, if you file three 1099-NEC forms, two 1099-MISC forms, and five W-2 forms, you have a total of ten information returns and must file all of them electronically.

IRIS

The IRS has created a free online portal called Information Returns Intake System (IRIS). It allows taxpayers to generate and e-file 1099 forms, view/update information, and download e-filed forms. To access IRIS, you must request a Transmitter Control Code (TCC) which can take up to 45 days to receive. We recommend starting this process early, so you are not left in a bind come January. Please visit https://www.irs.gov/filing/e-file-information-returns-with-iris for more details.

If you prefer not to prepare the forms yourself, KT has a streamlined process for submitting vendor information, preparing form 1099s, delivering them to recipients, providing you copies, and e-filing forms to the IRS. Around the middle of December, we will send out an email with an explanation of the process and an excel template to provide vendor information. Keep an eye out for this email!

What Can I Do Now?

Something you can start doing now is ensuring that you have a W-9 form on file for all vendors. This form will show the vendor’s EIN/SSN, full name or business name, mailing address, and their federal tax classification (if they are a sole proprietor, corporation, partnership, trust/estate, or LLC). This information is vital to issuing 1099 forms!

If you have questions regarding if a 1099 needs to be issued, accessing IRIS, retaining KT for the 1099 process, or anything else 1099 related, please reach out to your KT advisor.