1099 filing season is approaching, and now is the time to review your vendor information to ensure everything is in order come January.
Getting ahead on preparing 1099 forms will save you a great deal of time and reduce stress as the deadlines approach. Let’s break down what you need to know ahead of time, including what’s new for 2024, which we’ll cover in more detail below.
First, you’ll want to familiarize yourself with the standard 1099 forms that most companies must file.
Common 1099 Forms
Here’s an overview of common 1099 forms:
- 1099 NEC (Non-employee Compensation) reports payments of at least $600 or more in the calendar year to non-employees for services rendered.
- 1099 MISC (Miscellaneous) reports miscellaneous payments such as rent, prizes and awards, other income, medical and health payments, legal settlements, crop insurance proceeds, and fish boating process of $600 or more.
- 1099 MISC (Miscellaneous) is also used to report royalties of at least $10 and any amount of Section 409A deferrals and nonqualified deferred compensation plans (NQDCs)
- 1099 INT (Interest) is used to report interest paid of at least $10.
- 1099 DIV (Dividend) reports dividends paid of at least $10.
2024 Year-End Tax Planning Resources
Now’s the time to review your year-end tax planning options and strategies for the 2024 tax season. Withum’s Year-End Tax Planning Resource Center offers tips, legislative updates, and tax-saving opportunities for individuals and businesses.
Key Insights for 1099 Preparation
Now that you know the different 1099 forms, you can start reviewing your records to identify which vendors require a 1099. It is good practice to always have form W9, Request for Taxpayer Identification Number and Certification, on file for all vendors before issuing payments. Form W9 will contain the vendor’s Taxpayer Identification Number (TIN), mailing address, and their classification for tax purposes. The TIN may be a Social Security Number (SSN) or Employer Identification Number (EIN).
New to 2024
- There is a new W-9 form for 2024.
- Box 3 on form W9 was split into two lines, 3a and 3b. Box 3a has been modified to clarify how a disregarded entity completes this field. An LLC that is a disregarded entity should check the appropriate box for the tax classification of its owner. Otherwise, it should check the “LLC” box and enter its appropriate tax classification.
- Box 3b has been added to provide a flow-through entity with information regarding the status of its indirect foreign partners owners, or beneficiaries, so that it can satisfy any applicable reporting requirements.
E-Filing Requirements
- Starting the tax year 2023, if you have ten or more information returns to file in aggregate, you must file them electronically. Information returns are all forms of 1099, 1097, 1098, 3921, 3922, 5498, W-2s.
- Corrections to forms 1099 must be done in the same form they were initially filed. If your third-party vendor filed form 1099 electronically, you can no longer send a paper correction; the correction must be done electronically.
Applying for a Transmitter Control Code (TCC)
Now is the time to apply for a TCC, as it may take up to 45 days to process the application. Below are the three IRS e-filing systems, each system has their own transmitter control code (TCC) and cannot be used interchangeably.
- IRIS System (Information Reporting Intake System) - IRIS TCCs start with ‘D’. IRIS does not require special software to operate, making it the more accessible e-filing option. However, it does not allow submission of forms 1042 and only 100 or fewer forms can be submitted at a time.
- FIRE System (Information Returns) – FIRE TCCs start with a numeric character. FIRE Allows submission of forms of all information returns except forms 1094 and 1095 which are filed in AIR System. To generate the e-file to upload requires a third-party software.
- AIR System (Affordable Care Act Information Returns) – ACA TCCs start with ‘B’, ‘C’, or ‘T’. Under the Affordable Care Act (ACA), insurance companies, self-insured companies and businesses that provide health insurance to their employees must submit information returns to the IRS to report on individual health insurance coverage.
2024 1099-MISC, 1099-INT, 1099-DIV Deadlines
- Recipient copies – January 31, 2025
- Paper filing – February 28, 2025
- E-filing – March 31, 2025
Forms 1098, 1099-A, 1099-C, 1099-DIV, 1099-G, 1099-INT, 1099-K, 1099-MISC, 1099-NEC, and 1099-S have been converted to a continuous use form – meaning the IRS does not anticipate annual changes in the future. There are no substantive changes to the form or instructions for 2023.
2024 1099-NEC Deadlines
- Recipient copies – January 31, 2025
- Paper filing – January 31, 2025
- E-filing – January 31, 2025
An extension of time to furnish statements to recipients may be requested by fax. Your request must be received no later than the date the statements are due to the recipients. If your request for an extension is approved, generally, you will be granted a maximum of 30 extra days to furnish the recipient’s statements. Failure to file a correct information return results in a penalty of at least $660 per information return with no maximum penalty.
Plan Ahead When Preparing 1099 Forms
Preparing 1099 forms and requesting vendor information is time-consuming, and you want to allow yourself ample time to reach out and follow up with vendors. January 31st will be here before you know it, and after having time off for the holidays, the last thing you want to do is add to all the other year-end information you need to provide. Do yourself a favor and “don’t put off till tomorrow what you can do today.”
Author: Ana Costa | [email protected]
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