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Brief Guide About Income Payments on Form 1099
People say only two things are certain in life, death, and taxes. You cannot skip either or even dare to. Where January marks the new year it also is the time of the year that makes the beginning of filing of W2 Forms, W3 Forms, and several other Form 1099.
Introducing Form 1099
The 1099 form represents a series of documents issued by the IRS (Internal Revenue Service) as information returns. Now, there are a number of 1099 forms to fill but it depends on the type of income you may receive through the year that will define the type of forms to use.
If you are an employee, the person or the entity that hired you is responsible for filing the 1099 tax forms. In case you are a business holder then it surely is your responsibility to do so.
The deadline is January 31.
What Does The 1099-Form Say About Income Payments
The income payments on the 1099 forms are related from one business to another. The payments are recorded under two categories.
It will depend on the type of payment paid. Afterward, the form must be submitted to the IRS and the paid party.
When payments could be made to someone other than the employee like a company, fellow businesses, individuals, contractors, freelancers, independent vendors, and so on. Such payments are recorded in Form 1099-MISC (Miscellaneous Payments) or Form 1099-NEC (Nonemployee Compensation)
Reporting Income Payments On 1099-Form
Since 1982, the businesses are obliged to report all misc payments on Form 1099-MISC.
In case, $600 (or more) payment is made to someone who is not your employee you will require to fill the Form-1099.
For instance, a payment of $300 was paid in June. you will not require 1099 Forms in this case. But if you make another $300 payment later in the month, you have now hit the threshold of $600 within the same year. So, now it is compulsory to fill 1099 Forms.
But at the start of the tax year 2020, due to Protecting Americans from Tax Hikes (PATH) Act, the deadline to file information on NEC accelerated. Therefore, the IRS also requires you to report the Non-Employee Compensation on Form 1099-NEC.
The deadline resides on January 31. So in case you have any of the following income payments, you will have to report them on Form 1099-MISC.
Prizes or Rewards
Fishing Boat Proceeds
Medical and Healthcare Payments
Crop Insurance Proceeds
Section 409A Deferrals
Nonqualified Deferred Compensation
Other Income Payments
Note:If you sell $5000 (or more) consumer products to anyone you are eligible to submit a Form 1099-MISC.
These rules are applicable only if you are involved in doing business only. Personal payments are excluded.
For the most part, the income payments for Form 1099-MISC are required to report in Box 1 only for the
Limited Liability Companies
Primary Requirements To File 1099-Form
Before you can file for Form-1099 you will be needing For W-9s from all the vendors, contractors, and the rest of the payment recipients. By the time you start doing business with them, ask them to complete the form in the initial stages of contact.
The Form- W-9 includes the general information like their legal name, address, taxpayer identification number, and the rest of the detailed information you’ll need to report on Form-1099.
You need to remember to keep track of the payments you made via your bookkeeping or accounting system so that you can confirm where the payments were made and under the type of category they fall. This way you can ensure whether the payments fall under the categories required for reporting and the total sum of payments made for the year.
Note:If any payment does not directly come under the above-mentioned categories then instead of dashing it off the Form 1099-MISC you must consult a tax consultant priorly.
For the tax year 2020, the deadline for Form 1099-NEC is February 1, 2021. You can file 1099-MISC by March 1, 2021, if it’s on paper, or until March 21, 2021, if it’s electronic.
In case of any extension, you can make a request for a 30-day extension to file 1099-Forms. You will need to use Form 8809.
Note:Submit Form-1099 to the payment received by the actual deadline. There’s no additional time given for submission otherwise. But you are eligible to submit the Form to the Government by the extended date only.
Things To Remember About 1099-Form
All income payments are reported on Form-1099
Form 1099-NEC is used for independent contractors and other non-employees