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Where e-filing information return forms comes full circle. We support 1099, 1098, W-2, and Affordable Care Act forms.

Form 1099

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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New 1099-K Rules Will Begin in 2022

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We mentioned in this eFile360 article that the 1099-K threshold is changing in 2022, now we want to dive into the details and talk about what that change means for individuals and businesses. Here’s the latest news on the new 1099-K rules. 1099-K Rules: New Threshold Starting in the tax year 2022. The new 1099-K rules include a much lower threshold at which third-party payment entities will have to prepare and send out a Form 1099-K. These third-party or “payment settlement entities” include businesses like banks and any other organization that processes credit card transactions on the behalf of another merchant and then makes interbank transfers of funds from a customer to the merchant. This also includes third-party payment apps like PayPal, Venmo, Zelle, CashApp, Uber, and more. Previously, the threshold required these entities to only send out a Form 1099-K if they handled more than 200 transactions during the calendar year with a total gross amount of more than $20,000. But now, a section in the American Rescue Plan Act (ARPA) has amended these thresholds to $600 and no minimum transaction number, respectively. That means there will be a huge uptick in the number of 1099-K forms that these entities will be responsible for. Exceptions to the New 1099-K Threshold It’s important to note, however, that these transactions only count toward the new 1099-K threshold if they are “reportable third-party network transactions.” These reportable transactions include payments made for goods and services, not those made as personal gifts or reimbursements. So, if you own a coffee shop and your customers pay through a third-party entity, those transactions (after the $600 threshold) will need to be included on your Form 1099-K, but that money you sent to your friend because they paid your half of the dinner tab last week is not reportable. Cautions & Criticisms It’s worth noting that if you or others in your life often use these third-party …

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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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Hiring Independent Contractors as an LLC

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LLCs don’t always have the ability to hire a part- or full-time employee for a project. Here’s how it works when you are hiring independent contractors as an LLC. Get It in Writing Just as you should always have a clear contract when you are an employer or employee, or even just entering into a good-faith partnership for a limited time, you should know your rights and be transparent with your expectations. For your own safety and peace of mind, you should have a written contract drawn up any time you hire an independent contractor (even if that person is your family member or friend). You’ll also want to make sure you have proof of a real and separate business. Whether this comes in the form of a project estimate complete with letterhead and logo or you take a screenshot of an applicable landing page on the independent contractor’s website. Make Sure They are Considered a True Independent Contractor There isn’t a perfect set of criteria that defines what an independent contractor is. That means you have to do your research – make sure they qualify as an independent contractor. Legal Zoom has some great examples of circumstances that might raise red flags as far as determining an independent contractor’s status: A former employee is rehired to do work similar to their old job, even if temporary or part-time  An intern is doing actual work, not just shadowing or learning; be sure to check the six criteria related to interns You provide the equipment, supplies, tools, or ongoing office space the worker uses  The worker replaces one of your employees or supervises any of your employees The relationship is ongoing and long-term, not project-based Keep Up on Department of Labor Standards The Balance SMB recently reported that the Department of Labor has developed new standards for determining independent contractor vs. employee status. The ruling was set to go into effect in March of 2021, but currently, all regulations were frozen by …

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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 File Taxes as an Independent Contractor

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Independent contractors and employees are treated very differently when it comes to tax prep. Independent contractors are their own small businesses, even if they don’t have an incorporated or otherwise legally recognized business or brand. Let’s discuss what it takes to file taxes as an independent contractor. First, You Need a W-9 The beginning of the tax-filing process for independent contractors always starts with a W-9. Before you even start working on a contracting project, you need to be sure you’ve sent a W-9 with your name, address, and TIN (taxpayer identification number) to the company that is hiring you. It’s important to know who you are partnering with. W-9s must be sent to each company that wants to pay you for your contracting work, and they contain important and sensitive information about your business. Contractors Need Contracts No matter who you work with, whether it’s the President, a reputable local company, or your childhood best friend, it’s always best practice to get things in writing. Not only does a contract outline the expectations of the project for both parties, but it is also a great way to legally document the income you are expecting to make (be it hourly wages, cost of materials, or labor and equipment expenses). Nothing messes up your tax preparation and expectations more than a missing or incorrect payment. Contracts and legal agreements can be as itemized or as broad as you like, but you always want to make sure you protect yourself and your business. If you get paid by the company that hires you (which should happen 100% of the time, but it doesn’t always work that way), you will need to report that income. And if you don’t get paid by the company that hires you – whether it be for legal or illegal reasons – you’ll want to make sure you document the time and materials that you should have been compensated for on your taxes. Form 1040 or 1040SR Working as an independent contractor has tons of perks, but one …

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