As we approach the end of the year, it’s time to focus on the 1099-NEC compliance for the 2023 tax year. If requested, we’re here to guide you through this process to ensure timely and accurate filing. Notify us of your filing intent by email or phone.
Why is this important? The 1099-NEC form is required for reporting payments made to individuals and subcontractors exceeding $600 during the year. Timely and accurate filing is essential to avoid penalties.
Understanding The IRS Form 1099-NEC
Form 1099-NEC is a type of information return used by businesses to report non-employee compensation payments made during the calendar year. This includes payments made to independent contractors, freelance workers, and other payees who do not have an employer-employee relationship with the business. Payments that are reported on Form 1099-NEC include the following:
- Fees
- Commissions
- Bonuses
- Prizes
- Awards
- Gross proceeds paid to attorneys or someone instead of attorney’s fees
The threshold for reporting payments on Form 1099-NEC is $600 or more. This means that if you made any payments totaling at least $600 to a single recipient (or to a group of related recipients) during the calendar year, then you must report those payments on Form 1099-NEC.
Information That Should Be Reported On 1099-NEC
Form 1099-NEC requires you to report the name and address of the recipient, as well as the amount paid. The form also requires you to provide your federal employer identification number (EIN), which is used to identify you for tax purposes. Here’s the list of information that must be provided:
- Recipient’s name, address, and taxpayer identification number (TIN)
- Amount paid in the calendar year for services rendered or to reimburse expenses
- Employer Identification Number (EIN) of your business
- Any other amounts paid, such as taxes or attorney’s fees.
- State tax withholding information, if any, is due.
- Additional applicable local, state, and federal taxes or filing requirements, if any are applicable.
- Check the box indicating whether payments were made during the recipient’s trade or business (if it applies).
Remember to provide accurate and timely 1099-NEC information filing to the IRS and your contractor. Not doing so can lead to hefty fines and penalties – none of us want that! So, ensure all the required information is included when filing 1099-NEC forms.
What’s New On The 1099-NEC 2023?
In 2020, the IRS received Form 1099-NEC to report non-employee compensation, which was previously reported on Form 1099-MISC. No changes have been made to the form for 2023. Make sure you stay current so that your filing is accurate and timely. If not, costly penalties could be incurred!
Ready to get started?
Actions Needed:
- Collect W-9 Forms Now: Ensure you have current W-9 forms from all contractors.
- Upload W-9 Forms: or assistance with 1099 preparation, please upload W-9s or a relevant spreadsheet to your client portal.
- Update Your Books: Ensure your books are up to date to determine the total amount paid to each vendor.
Due Dates:
- 1099-NEC Filing Deadline: January 31, 2024
- Recommended Internal Deadline for W-9 Collection: December 15, 2023
Filing Fees:
- Software Costs: Software providers charge for this service, either per 1099 or per year.
- Postage vs Electronic Delivery: Electronic delivery is available. Postage will be billed separately if required.
- AFSG Service: Base fee: $100 + $8 per 1099. Minimum charge: $115. This covers 1 hour of our time and our software filing fees.
Notify us of your filing intent by email or phone by January 15th 2024.
References
Internal Revenue Service. (2023). Form 1099 NEC & Independent Contractors. https://www.irs.gov/faqs/small-business-self-employed-other-business/form-1099-nec-independent-contractors/form-1099-nec-independent-contractors
Zenwork. (2023). Form 1099-NEC: What businesses need to know for 2023? Tax1099 Blog. https://www.tax1099.com/blog/form-1099-nec-what-businesses-need-to-know/
