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1099-MISC

1099-MISC, 1099-NEC, 1099-K: What’s the Difference?

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The introduction of the 1099-NEC in 2020 has many businesses still stumped about which to file: 1099-MISC, 1099-NEC, or 1099-K. Let’s break them down here quickly. Because there are more than 40 different information returns that businesses and individuals are filing any given year, it’s easy to get lost in them. Each one has been described in detail by the IRS, but that doesn’t mean there won’t be specific cases where you are unsure if someone who did work for you is considered an independent contractor or not, or whether your last Venmo payment to a contractor puts you over the threshold that then requires an information return be filed. Rest assured, eFile360 is here to help. 1099-MISC The Form 1099-MISC is the one you’ll use to report miscellaneous payments you’ve made throughout the year. These miscellaneous payments include, according to the IRS, any of the following that totaled at least $600: Rents Prizes and award Other income payments that don’t include non-employee payments (those are filed on the 1099-NEC, see below) Medical and healthcare payments Proceeds from crop insurance Cash payments for fish and other aquatic life purchased from anyone in the trade or business of catching fish Cash paid from notional principal contract to an individual, partnership, or estate Payments to an attorney Fishing boat proceeds The term “miscellaneous” accurately describes the different payment types and descriptions captured here, and previously was used to report the non-employee payments made to independent contractors, but that is now reported on the newly reinstated 1099-NEC. Because the 1099-MISC is responsible for reporting so many different things, it’s important to know when and if your payments fall in these categories, as there are penalties for incorrect filings. 1099-K 2022 has been a hot year for 1099-K changes. Many tax, business, and payment industry gurus are weighing in on the latest changes and how they …

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Do I Need to File 1099-NEC AND 1099-MISC?

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We’ve talked a lot about the differences between Forms 1099-MISC and 1099-NEC. But are there instances where you’d need to file both? 1099-NEC and 1099-MISC The 2021 drafts for 1099-NEC and 1099-MISC have been out since late last year. The goal of reintroducing the 1099-NEC (last used in 1982) was to keep non-employee expenses separate from the 1099-MISC. As more and more businesses rely on independent contractors and freelancers, the 1099-NEC will become more widely used in the future. When to File Only 1099-NEC If you have payments totaling more than $600 to a non-employee, which includes any person or business hired as an independent contractor or freelancer, you’ll need to fill out the Form 1099-NEC. Here are a few other eFile360 blog resources that talk about how the 1099-NEC works: Filing 1099-NEC: Dos and Don’ts Examples of When to Use Form 1099-NEC When to File Only 1099-MISC Your business will need to file a 1099-MISC for every independent contractor you have paid more than $600 within the tax year for anything other than non-employee compensation. You’ll fill out the 1099-MISC after you request and receive that independent contractor’s W-9. Some main items reported on the 1099-MISC include: Rent Proceeds from a fishing boat Royalties Substitute payments made instead of paying interest or dividends Payments for medical and healthcare Crop insurance proceeds Gross proceeds paid to a lawyer Excess golden parachute payments For more resources to help with your 1099-MISC filing, check out these eFile360 blog articles: What You Need to Know about 1099-MISC Online Form Filing A Guide to Preparing 1099-MISC Forms When Do I Need to File Both? In some cases, you may be required to fill out both 1099-NEC and 1099-MISC. In these cases, you will have paid an independent contractor or freelancer more than $600 throughout the year either for services or parts and materials, while also paying: …

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Ultimate Guide to 1099s

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There are lots of different 1099s and we wanted to help you better understand them, so we’ve put together this guide of eFile360 resources to help you grow your understanding. 1099s: The Basics First thing’s first – what is a 1099? It is, at its most basic form, a tax document that is used to report miscellaneous payments made to individuals who are not employed by your business. Any non-employee who receives more than $600 from you in any given tax year should receive a 1099 from you. There are more than a dozen different types of 1099 forms, the most popular include 1099-MISC (and now 1099-NEC), 1099-INT, 1099-DIV, 1099-K, 1099-B, 1099-G, and 1099-R. For a full list of 1099s and what each one is used for, check out this blog post. Typically, the deadline for filing 1099s with the IRS and also sending them to each independent contractor recipient is January 31. Here’s a quick resource on common 1099 questions. The New Kid: 1099-NEC In tax year 2020, the 1099-NEC was brought back to take the place of Box 7 on form 1099-MISC. The 1099-NEC did not replace the 1099-MISC, it was just reinstated to help streamline the process for filing non-employee compensation. Some examples of non-employee compensation include professional service fees to accountants, attorneys, architects, contractors, engineers, and more; payments for services like parts or materials used to complete the services, director’s fees, and other payments made to freelancers and independent contractors. For more about who fills out the 1099-NEC, click here. We also put together a great list of dos and don’ts as it pertains to the form 1099-NEC. You can read it here. 1099 FAQs The IRS has a ton of great insights into frequently asked questions about 1099s, including: What's the difference between a Form W-2 and a Form 1099-MISC or Form 1099-NEC? How do you determine if a worker is an employee or an independent contractor? I received a Form 1099-NEC instead of a Form W-2. …

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Everything You Need to Know about Taxable Income

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Are you just starting your tax journey? Have you been employed by someone else in the past and are now working for yourself as a small business owner, independent contractor, or freelancer? Did your side hustle take off? Let’s talk about taxable income. What is Taxable Income? According to Investopedia, taxable income is “the portion of an individual’s or company’s income used to calculate how much tax they owe the government in a given tax year.” Taxable income includes wages, salaries, bonuses, tips, investment income (profits and dividends), and some types of unearned income (unemployment compensation, pensions, annuities and some social security benefits). Basically, if you received money from a person, business, or government program this year, there’s a large chance it is considered taxable income. One big exception to this rule is if the business is a nonprofit. Non-profit businesses are exempt from paying federal income tax, sales tax, and property tax if they meet certain criteria. The amount of taxable income you are responsible for will vary based on how much you made in the tax year you are filing for. And the taxes on your income get increasingly higher as you make more money, so it is important to take a close look at your earnings every year. How to Calculate Taxable Income There are a few steps to calculating your taxable income: Determine your filing status. There are 5 filing statuses to choose from, and taxpayers always want to choose the filing status that results in the lowest taxes possible for their situation. The filing statuses are: single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent child. Gather all documents. You’ll need to gather all documents from all sources of income for you, your spouse, and your dependents, based on your living and family situation and the filing status you chose. Form W-2s are given when income is earned by a traditional …

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2021 Deadline for Forms 1099-MISC and 1099-NEC

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Tax season is around the corner, so it’s time to start gathering information and preparing for the deadlines. What is the 2021 deadline for filing 1099s? The 2021 deadline for Forms 1099-MISC and 1099-NEC is Monday, February 1 since the typical deadline date, January 31, lands on a Sunday. The deadline for Form W-2 is also February 1, 2021. According to CPA Practice Advisor: A 2015 law made it a permanent requirement that employers file copies of their Form W-2, Wage and Tax Statements, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by Jan. 31. That is also the date the Forms W-2 are due to workers. This includes Form 1099-NEC and 1099-MISC as it relates to independent contractors and related nonemployees. However, now that nonemployee compensation has been separated from Form 1099-MISC onto Form 1099-NEC, the deadline to e-file Form 1099-MISC is March 31, 2021. What does this mean for your business? Business owners need to file 1099s to the IRS and send pay statements to freelancers, contractors, and other miscellaneous earners by the deadline. This means you will want to start gathering the following information for the independent contractors who have worked for you in 2020: Full name Address Social Security Number or Individual Taxpayer Identification Number Learn more about the latest instructions for Forms 1099-MISC and 1099-NEC from the IRS here. Start your e-filing process with eFile360 E-filing is the quickest and safest way to submit forms, so e-file with eFile360. Create a free account today.  Be sure to utilize our TIN Checking service, which helps you know if you are reporting accurate tax IDs and names. Learn more about our TIN Checking service here. …

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6 Common 1099 Questions

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As the trend towards freelance work continues to grow, more and more people will have to file form 1099, specifically 1099-NEC. Tax filing season will be here before you know it, and we wanted to share 6 common 1099 questions that businesses and individuals alike are asking. What is the deadline for filing 1099s? The deadline for filing 1099s with the IRS and for sending them to the independent contractor recipient is January 31 every year. However, for tax year 2020, the deadline is February 1, because January 31 falls on a Sunday. What happens if there are errors on my 1099? The most common errors associated with 1099 filing are: filing the wrong form type, reporting the wrong amount, reporting the wrong TIN or not including one at all, using the wrong year/version of the form, and not using the correct IRS form (you cannot download or copy). We’ve shared some tips here on how to fix your errors and file a correction. What are the different types of 1099s and what are they used for? There are 18 different 1099 forms: 1099-A, 1099-B, 1099-C, 1099-CAP, 1099-DIV, 1099-G, 1099-H, 1099-INT, 1099-K, 1099-LTC, 1099-MISC, 1099-NEC, 1099-OID, 1099-PATR, 1099-Q, 1099-R, 1099-SA, and 1099-SB. 1099-NEC and 1099-MISC are two of the most common 1099s. For more information on what the other 1099 forms are used for, check out our blog post on that topic. What’s the difference between 1099-NEC and 1099-MISC? The 1099-MISC is for reporting miscellaneous payments made to independent contractors for things like rent, fishing boat proceeds, royalties, substitute payments, medical/healthcare payments, crop insurance proceeds, gross proceeds paid to a lawyer, and any excess golden parachute payments. It was previously used to report non-employee compensation and wages. Non-employee compensation reporting is now done on the renewed 1099-NEC form – this was reintroduced to separate non-employee expenses and prevent common reporting mistakes. You’ll use a 1099-NEC to …

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