RESOURCES

EVERYTHING YOU WANTED TO KNOW ABOUT 1099 FORMS

Hot take: If you pay someone more than $600 in the course of your trade or business, you may be required to issue them a form 1099-NEC or 1099-MISC.

Read on to learn more and check out the IRS instructions for 1099 forms here (PDF).

Answer: Form 1099-NEC (Nonemployee Compensation) is NEW and is used to report non-employee compensation only. It’s ONLY used to report income you pay to someone who works for you on a contract basis… an independent contractor, someone who is self-employed. Form 1099-MISC will continue to be used for all other payments such as rents, royalties, medical and health care payments, and other income.

Answer: Do you have a trade or business? If you’re self-employed (which includes freelancing and getting paid as an independent contractor), then this applies to you. If you have an S Corporation, a C Corporation, or a partnership, it applies to you. It also may apply to you if you have rentals (including short-term rentals, like Airbnb).

It does NOT apply to you if you pay someone for a personal or household task. Paying someone to wash the windows in your home? Assuming your house is not used for business, then no reporting requirement. Paying someone to wash the windows for your retail storefront? Then YES, you may need to issue a 1099-NEC to report it. Paying your personal rent on your home? No reporting requirement. Paying rent for your commercial space? Then YES, you may need to issue a 1099-MISC to report it.

Although “trade or business” is one of the most widely used terms in the tax code, neither the code nor the Treasury Regulations provide a definition. The definition of a “trade or business” that we pay attention to comes from common law, and The Supreme Court has interpreted “trade or business” to mean an activity conducted with “continuity and regularity” and with the primary purpose of earning income or making profit.

Answer: It sure does! If you are paying a corporation (an S Corporation or C Corporation), then you do not need to issue them a 1099. (But remember that an LLC is NOT necessarily a corporation in the IRS’s eyes – you will need the LLC to complete a form W-9 to determine this.) If you are paying your rent to a property management company (instead of the building owner), then you may not need to issue a 1099. If you are paying for merchandise, storage, freight and similar items, then you don’t need to issue a 1099.

Answer: You should get a form W-9 from anyone that you pay in your trade or business: download a W9 here (PDF). This form will ask the recipient to report if they are a corporation (in which case you’re off the hook!), their tax ID number (usually their SSN or EIN), and their business name/address, all of which you will use to prepare and issue the 1099-NEC or 1099-MISC form to them. We HIGHLY recommend getting this form BEFORE you cut the first check. That way you have it on file and you don’t need to worry about chasing them down under a short deadline. If you are unable to get a form W-9, you can still issue the correct form, it just makes it a little trickier, and you also may be required to withhold money that you pay them going forward (called “backup withholding”).

Answer: Forms 1099-NEC are due to recipients (the person you paid) AND to the IRS by January 31st.

If you are only filing 1099-MISC forms, they are due to the recipient by January 31st, but those forms can be reported to the IRS ONLY as late as February 28th.

We think that filing electronically is the easiest option for filing 1099-NEC and 1099-MISC forms, and there are many options for doing this. We love Track1099.com, and efile4biz.com, which both file electronically and deliver to the recipient via a secure portal. QuickBooks Online also offers this, and we’ve heard of a number of other 3rd party options as well. REMEMBER that Oregon requires you to report as well, and you will need to do this using Oregon’s iWire.

If you don’t have that many, you can file these forms on paper. Order free forms from the IRS here. Most office supply places will also sell the forms (but if you’re going to pay – just file them online for Pete’s sake!).

Artemis Tax can issue these forms for you if you don’t want to do it yourself. Request that we file for you here.

Answer: Want to get out of this reporting requirement? Pay with a credit or debit card! Payments that are made with a credit card, or through a 3rd party processor like Square or PayPal, are reported by the credit card company, which means that you generally don’t have to report them on a 1099! This does NOT apply if you make the payment using a 3rd party processor as an individual, like sending money through PayPal as “Friends and Family” (but we hope that you are not making business payments and marking them as friends and family payments anyway!) If you have some transactions that you paid with a credit card and some that you paid with a check, technically you are only required to report the payments you made by check on the 1099-NEC or 1099-MISC.