What are 1099 forms and who must file them

There is a lot of confusion around 1099 forms and when to file them. The process and rules are (fairly) simple, the biggest challenge is the quick turnaround in January since these are due on the 31st. 

The IRS requires 1099’s to report payments made to non-employees. New for 2020 is form 1099-NEC, which replaces the 1099-misc to report non-employee compensation, the 1099-misc still exists for other payments. The short version of the rule is that you must file a 1099 form if you are a business entity paying a non-employee $600 or more.

There are two parts to the 1099: 

Part 1: the 1099 issued to the person you paid. They use this to record and report their income. 

Part 2: a 1099 report that you file with the IRS where you tell them about all of the 1099’s you issued to individuals. 

How to file a 1099

If you are a Startup Back Office client we will take care of this for you. Learn more about these services here. If you are a tax only client, we can file these on your behalf but require a list of people/entities to whom you have made the payments. Download our excel sheet with instructions here.

The majority of 1099’s are 1099-NEC forms, or non-employee compensation forms, the deadline for these forms is January 31 – we file all 1099’s by this deadline so require information from you by January 24.

Collect 1099 information as you make payments

Be sure to collect information from vendors/contractors throughout the year. Have them fill out a W-9 form before you make the first payment. It is much easier to get people to respond when they have to in order to receive money. In January they won’t be nearly as motivated as you will be.

What entities must file a 1099-NEC or 1099-misc

Trades, businesses or business-like entities must report payments that they make to non-employees using Form 1099-MISC or Form 1099-NEC 

You do not have to report personal payments.

The IRS considers that you are engaged in a trade or business if you either operate for gain or profit or formally run a non-profit organization.

Business-like entities include trusts of qualified pension or profit-sharing plans of employers, certain organizations exempt from tax under section 501(c) or 501(d), farmers’ cooperatives that are exempt from tax under section 521, and widely held fixed investment trusts. 

Federal, state, and local government agencies must also report payments.

The exception: when you don’t need to file the 1099-misc or 1099-NEC

Some payments do not have to be reported on Form 1099-MISC or Form 1099-NEC, although they may be taxable to the recipient. Payments you do not have to report include payments to corporations and limited liability companies (LLC’s) that are treated as C or S corporations. Form 1099-NEC, 

Your business must file a 1099 NEC when: 

File a Form 1099-NEC for each person to whom you have paid at least $600 during the year for:

  1. Services performed by someone who is not your employee (including parts and materials),
  2. Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish, or
  3. Payments to an attorney regardless of entity. (More below). 
  4. Withholding. You must also file Form 1099-NEC for each person from whom you have withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.

1099-NEC reporting filing due date. 

Form 1099-NEC is due to the IRS and the payee by January 31 of the following year (so due in January 2021 for payments in 2020). 

Your business must file a 1099-MISC when

File Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year:

At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest,

At least $600 in:

  • Rents
  • Prizes and awards,
  • Other income payments,
  • Medical and health care payments,
  • Crop insurance proceeds,
  • Generally, the cash paid from a notional principal contract to an individual, partnership, or estate,
  • Payments to an attorney. See Payments to Attorneys
  • Any fishing boat proceeds,
  • Section 409A deferrals, or
  • Nonqualified deferred compensation.

Also, use Form 1099-MISC to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

1099-MISC reporting filing due date

The due date for issuing statements to payees is January 31. You can take longer to submit the paperwork to the IRS, form 1099-MISC is due to the IRS by February 28 of the following year if filing by paper, or March 31 if filing electronically.

Payments to Attorneys

The exemption from reporting payments made to corporations does not apply to payments for legal services. 

Therefore, you must report attorneys’ fees (in box 1, Form 1099- NEC) or gross proceeds (in box 10, Form 1099-NEC) as described earlier to corporations that provide legal services.

The term “attorney” includes a law firm or other provider of legal services.
You must report all attorneys’ fees of $600 or more paid in the course of your trade or business in box 1 of Form 1099-NEC

Also, report any gross proceeds paid to attorneys. These are amounts that are NOT attorney’s fees. You report this in box 10 of Form 1099-MISC. 

  • These include payments
  • made to an attorney in the course of your trade or business connected with legal services that are NOT attorney’s fees, for example, as in a settlement agreement,
  • total $600 or more, and
  • you have not reported in box 1, Form 1099-NEC.

Penalties

If you fail to file correct information returns and/or fail to furnish accurate payee statements by the due date and you cannot show reasonable cause, you may be subject to a penalty.

The penalty for late filing or furnishing within 30 days of the due date is $50 per return, with a maximum penalty of $565,000. Taxpayers who show intentional disregard of the filing requirements can be assessed a penalty of $560 per return, with no maximum amount of penalties.

A penalty for failure to file a correct information return is separate from the penalty for failure to furnish the accurate payee statement. For example, if you fail to file a proper Form 1099-MISC with the IRS and don’t provide a correct Form 1099-MISC statement to the payee, you may be subject to two separate penalties.

How we can help

We can take care of all of your financial back office including filing your 1099’s. Our CFO services are designed to help you turn accounting and financial hassle into usable information to plan for the future. 

If you are a client and would like to book a consultation, just click here

If you aren’t a client, why not? We can take care of your accounting, bookkeeping, and CFO needs turning your accounting from an annoyance into an asset. Interested?  Click here for a no-obligation consultation.

Frequently Asked Questions

Do I have to file a 1099 for personal payments?

No, only business entities are required to file 1099 forms.

When are 1099’s due

There are a couple of different deadlines for 1099 forms. We recommend filing all of them by January 31st, this is when they are due to the recipient. 1099-NEC forms are due to the IRS by January 31st, 1099-misc forms are due to the IRS by February 28 it filing by paper, March 31 if filing electronically. 

Is there a penalty for filing/issuing a 1099 if it is not needed

No. You are better off erring on the side of issuing 1099’s than not. Any time you pay someone who is not an employee, have them complete a W-9 and plan to send them a 1099 form in January.

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There is a lot of confusion around 1099 forms and when to file them. The process and rules are (fairly) simple, the biggest challenge is the quick turnaround in January since these are due on the 31st. 

The IRS requires 1099’s to report payments made to non-employees. New for 2020 is form 1099-NEC, which replaces the 1099-misc to report non-employee compensation, the 1099-misc still exists for other payments. The short version of the rule is that you must file a 1099 form if you are a business entity paying a non-employee $600 or more.

There are two parts to the 1099: 

Part 1: the 1099 issued to the person you paid. They use this to record and report their income. 

Part 2: a 1099 report that you file with the IRS where you tell them about all of the 1099’s you issued to individuals. 

How to file a 1099

If you are a Startup Back Office client we will take care of this for you. Learn more about these services here. If you are a tax only client, we can file these on your behalf but require a list of people/entities to whom you have made the payments. Download our excel sheet with instructions here.

The majority of 1099’s are 1099-NEC forms, or non-employee compensation forms, the deadline for these forms is January 31 – we file all 1099’s by this deadline so require information from you by January 24.

Collect 1099 information as you make payments

Be sure to collect information from vendors/contractors throughout the year. Have them fill out a W-9 form before you make the first payment. It is much easier to get people to respond when they have to in order to receive money. In January they won’t be nearly as motivated as you will be. 

What entities must file a 1099-NEC or 1099-misc


Trades, businesses or business-like entities must report payments that they make to non-employees using Form 1099-MISC or Form 1099-NEC 

You do not have to report personal payments.

The IRS considers that you are engaged in a trade or business if you either operate for gain or profit or formally run a non-profit organization.

Business-like entities include trusts of qualified pension or profit-sharing plans of employers, certain organizations exempt from tax under section 501(c) or 501(d), farmers’ cooperatives that are exempt from tax under section 521, and widely held fixed investment trusts. 

Federal, state, and local government agencies must also report payments.


The exception: when you don’t need to file the 1099-misc or 1099-NEC

Some payments do not have to be reported on Form 1099-MISC or Form 1099-NEC, although they may be taxable to the recipient. Payments you do not have to report include payments to corporations and limited liability companies (LLC’s) that are treated as C or S corporations. Form 1099-NEC, 

Your business must file a 1099 NEC when: 

File a Form 1099-NEC for each person to whom you have paid at least $600 during the year for:

  1. Services performed by someone who is not your employee (including parts and materials),
  2. Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish, or
  3. Payments to an attorney regardless of entity. (More below). 
  4. Withholding. You must also file Form 1099-NEC for each person from whom you have withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.

1099-NEC reporting filing due date. 

Form 1099-NEC is due to the IRS and the payee by January 31 of the following year (so due in January 2021 for payments in 2020). 

Your business must file a 1099-MISC when

File Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year:

At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest,

At least $600 in:

  • Rents
  • Prizes and awards,
  • Other income payments,
  • Medical and health care payments,
  • Crop insurance proceeds,
  • Generally, the cash paid from a notional principal contract to an individual, partnership, or estate,
  • Payments to an attorney. See Payments to Attorneys
  • Any fishing boat proceeds,
  • Section 409A deferrals, or
  • Nonqualified deferred compensation.

Also, use Form 1099-MISC to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

1099-MISC reporting filing due date

The due date for issuing statements to payees is January 31. You can take longer to submit the paperwork to the IRS, form 1099-MISC is due to the IRS by February 28 of the following year if filing by paper, or March 31 if filing electronically.

Payments to Attorneys


The exemption from reporting payments made to corporations does not apply to payments for legal services. 

Therefore, you must report attorneys’ fees (in box 1, Form 1099- NEC) or gross proceeds (in box 10, Form 1099-NEC) as described earlier to corporations that provide legal services.

The term “attorney” includes a law firm or other provider of legal services.
You must report all attorneys’ fees of $600 or more paid in the course of your trade or business in box 1 of Form 1099-NEC

Also, report any gross proceeds paid to attorneys. These are amounts that are NOT attorney’s fees. You report this in box 10 of Form 1099-MISC. 

  • These include payments
  • made to an attorney in the course of your trade or business connected with legal services that are NOT attorney’s fees, for example, as in a settlement agreement,
  • total $600 or more, and
  • you have not reported in box 1, Form 1099-NEC.

Penalties

If you fail to file correct information returns and/or fail to furnish accurate payee statements by the due date and you cannot show reasonable cause, you may be subject to a penalty.

The penalty for late filing or furnishing within 30 days of the due date is $50 per return, with a maximum penalty of $565,000. Taxpayers who show intentional disregard of the filing requirements can be assessed a penalty of $560 per return, with no maximum amount of penalties.

A penalty for failure to file a correct information return is separate from the penalty for failure to furnish the accurate payee statement. For example, if you fail to file a proper Form 1099-MISC with the IRS and don’t provide a correct Form 1099-MISC statement to the payee, you may be subject to two separate penalties.

How we can help

We can take care of all of your financial back office including filing your 1099’s. Our CFO services are designed to help you turn accounting and financial hassle into usable information to plan for the future. 

If you are a client and would like to book a consultation, just click here

If you aren’t a client, why not? We can take care of your accounting, bookkeeping, and CFO needs turning your accounting from an annoyance into an asset. Interested?  Click here for a no-obligation consultation.

Frequently Asked Questions

Do I have to file a 1099 for personal payments?

No, only business entities are required to file 1099 forms.

 When are 1099’s due

There are a couple of different deadlines for 1099 forms. We recommend filing all of them by January 31st, this is when they are due to the recipient. 1099-NEC forms are due to the IRS by January 31st, 1099-misc forms are due to the IRS by February 28 it filing by paper, March 31 if filing electronically. 

Is there a penalty for filing/issuing a 1099 if it is not needed

No. You are better off erring on the side of issuing 1099’s than not. Any time you pay someone who is not an employee, have them complete a W-9 and plan to send them a 1099 form in January.

Jeff Coyle, CPA

Jeff Coyle, CPA, Partner of Rosenberg Chesnov, has been with the firm since 2015. He joined the firm after 20 years of business and accounting experience where he learned the value of accurate reporting, using financial information as a basis for good business decisions and the importance of accounting for management.

He is a diligent financial professional, able to manage the details and turn them into relevant business leading information. He has a strong financial background in construction, technology, consulting services and risk management. He also knows what it takes to create organizations having built teams, grown companies and designed processes for financial analysis and reporting.

His business experience includes:

Creating and preparing financial reporting, budgeting and forecasting.
Planning and preparation of GAAP and other basis financial statements.
Providing insight on financial results and providing advice based on those results.

Jeff also has a long history of helping individuals manage their taxes and plan their finances including:

Income tax planning and strategy.
Filing quarterly and annual taxes.
Audit support.
General financial and planning advice.
Prior to joining the firm in 2015, Jeff was in the private sector where he held senior financial and management positions including Controller and Chief Financial Officer. He has experience across industries, including construction, technology and professional services which gives him a deep understanding of business.

Jeff graduated from Montclair State University, he is a CPA and member of the American Institute of Certified Public Accountants, New York State Society of Certified Public Accountants and New Jersey State Society of Public Accountants.

Jody H. Chesnov, CPA

Jody H. Chesnov, CPA, Managing Partner of Rosenberg Chesnov, has been with the firm since 2004.  After a career of public accounting and general management, Jody knows the value of good financials.  Clarity, decision making, and strategy all start with the facts – Jody has been revealing the facts and turning them into good business results for more than three decades.

He takes a pragmatic approach to accounting, finance and business. His work has supported many companies on their path to growth, including helping them find investors, manage scaling and overcome hurdles.  His experience and passion for business reach beyond accounting and he helps businesses focus on what the numbers mean organizationally, operationally and financially.

He has a particular expertise in early-stage growth companies.  His strengths lie in cutting through the noise to come up with useful, out of the box, solutions that support clients in building their businesses and realizing their larger visions.

Prior to joining the firm in 2004, Jody was in the private sector where he held senior financial and management positions including General Manager, Chief Financial Officer and Controller.  He has experience across industries, which gives him a deep understanding of business.

Jody graduated with a BBA in Accounting from Baruch College, he is a CPA and member of the American Institute of Certified Public Accountants and New York State Society of Certified Public Accountants.

In addition to delivering above and beyond accounting results, Jody is a member of the NYSCPA’s Emerging Tech Entrepreneurial Committee (ETEC), Private Equity and Venture Capital Committee and Family Office Committee.  

He is an angel investor through the Westchester Angels, and has served as an advisor for many startup companies and as a mentor through the Founders Institute.

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