With year-end rapidly approaching, the 1099 filing due date of January 31, 2023, is right around the corner. If your business pays an individual or company more than $600 for services or rent, you may be required to file Form 1099. The information below explains the different types of Form 1099 and when you may be required to file. It also outlines the penalties associated with not filing these information returns timely.
Do you need to file Form 1099?
Form 1099 is an information return to be filed with the IRS annually. However, there are multiple types of the form. The most common are 1099-INT, 1099-DIV, 1099-NEC, 3921, and 1099-MISC. Please see the guidelines below for when you should be issuing a 1099. For any payee that you are required to file a 1099 for, you should request and keep on file form W-9. The W-9 contains all of the necessary information to complete the 1099 correctly. You can obtain copies of the W-9 directly from the IRS website, www.irs.gov. You should obtain a completed W-9 prior to paying a service provider for services performed.
File Form 1099-Misc for each person or business to whom you have paid during the year:
- $600 or more in rents
- $10 or more in royalties
File Form 1099-NEC for each person or business to whom you have paid during the year:
- $600 or more in services (including parts and materials)
- $600 or more in prizes and awards
- $600 or more in other income payments
- $600 or more paid to an attorney, whether they are incorporated or not
File Form 1099-INT for each person or business to whom you have paid during the year:
- $10 or more of interest in the course of your trade or business
File Form 1099-DIV for each person or business to whom you have paid during the year:
- $10 or more of dividends, capital gain distributions, or non-taxable distributions in the course of your trade or business
File Form 3921 for each person or business to whom you have paid during the year:
- Any amount of transfer of stock pursuant to the exercise of an incentive stock option in the course of your trade or business
Some payments are not required to be reported on Form 1099, although they may be taxable to the recipient. These generally include:
- Payments to a corporation (unless paid to an incorporated attorney, they are reportable)
- Payments for merchandise, telephone, freight, storage, and other similar items
- Payments of rent to real estate agents
- Reimbursements for business travel expenses or payments of business travel allowances
- Payments to a tax-exempt organization
As part of your annual income tax reporting to the IRS, there are questions regarding your requirements to file Form 1099 and if you indeed did file the required forms. The penalties for filing late or not filing the required forms can add up quite quickly. The penalties listed below are per information form. This means if you were required to file 15 forms, each penalty would be multiplied by 15.
- $50 per information return if correctly filed within 30 days of the due date.
- $110 per information return if correctly filed more than 31 days after the deadline but prior to August 1.
- $290 per information return if correctly filed after August 1.
- $580 per information return if you intentionally did not file required returns.
We encourage you to review your cash disbursements for the year and determine your filing requirements. The deadline to issue forms to recipients is January 31, 2023. All 1099 forms that contain non-employee compensation payments must have all copies filed with the government on or before January 31, 2023.