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1099 Requirements

 

Reporting Non-Employee Compensation: Form 1099-NEC

Starting with payments made in 2020, businesses must report non-employee compensation on Form 1099-NEC (Nonemployee Compensation) rather than in Box 7 of Form 1099-MISC.

Why the Change?

  • The Path Act of 2015 requires businesses to report non-employee compensation by January 31 each year.
  • Form 1099-MISC retains its March 31 filing deadline for other miscellaneous payments.
  • The new Form 1099-NEC ensures compliance with earlier reporting deadlines.

Rental Income & Vendor Payment Reporting

If you receive rental income, you must report total payments of $600 or more per year to vendors providing services (e.g., plumbing, maintenance, accounting).

Exceptions to Reporting Requirements:

  • Payments to corporations
  • Transactions made using debit or credit cards
  • Payments to multiple vendors under $600 per vendor
  • Non-deductible payments for personal-use property

Step-by-Step Guide for Form 1099-NEC Compliance

1. Obtain an Employer Identification Number (EIN)

  • Though not required, an EIN helps reduce identity theft risk compared to using a Social Security Number (SSN).
  • Apply online at IRS.gov.

2. Gather Vendor Information

Each vendor should complete Form W-9 (Request for Taxpayer Identification Number) to provide:

  • Name & Address
  • EIN or SSN
  • Business Type (Sole Proprietor, Partnership, Corporation, etc.)
  • Certification of accurate tax information

Best Practice: Collect vendor details before making payments.

3. Maintain Detailed Accounting Records

  • Track payments of $600 or more to vendors.
  • Separate service-related payments from goods purchases.
  • Exclude payments related to personal-use property.

4. Submit Form 1099-NEC Before Deadlines

  • Provide "Copy B" to vendors by January 31.
  • File "Copy A" with the IRS by February 28.
  • Form 1099-NEC requires a scannable hard copy—contact the IRS to obtain official forms.

Need Assistance?

If you have questions regarding your reporting requirements, feel free to reach out for guidance. Proper planning ensures compliance and smooth processing of tax forms.