To streamline the process, consider the following tips:

  • Maintain organized bookkeeping throughout the year to ensure accurate records are ready by January when forms need to be filed.
  • Annually request an updated Form W-9 from your contractors to confirm you have their current information. Always verify that you have an updated W-9 on file before making any payments.
  • Prepare to fill out 1099s by having all necessary information readily available.
Understanding the W-9 Form

The W-9 form, titled “Request for Taxpayer Identification Number and Certification,” is a
basic tax form required by the IRS. It collects essential details such as a contractor’s tax
identification number, either their Social Security Number or Employer Identification Number
(EIN). If a contractor has an EIN, they do not need to provide their Social Security Number.
The form also requires the contractor to confirm that the information is accurate and that
they have the legal right to work in the U.S. Contractors earning over $600 from a business
in a year must complete this form. Failure to do so may result in the business needing to
withhold 28% of their payments for tax purposes.

How to Obtain a W-9 Form
  • You can download a free W-9 form from the IRS website, available in both English and Spanish. Simply visit www.IRS.gov and search for “W-9” to find a blank versionalong with specific instructions on how to complete it.
  • Ensure that the full legal name is provided on the W-9—no nicknames or abbreviations. The name used on the 1099 should match exactly as listed on the W-9.
  • It’s advisable to request updated W-9 forms each year from contractors to ensure you have the correct address on file.
Differentiating Between Form 1099-NEC and 1099-MISC

Here are important points to consider when filing 1099s:

  • Form 1099-NEC is used for reporting non-employee compensation exceeding $600, such as payments to independent contractors and attorneys. It should not be used for payments related to physical products.
  • Form 1099-MISC covers other payments like rent, royalties, and medical payments.

C-Corporations and S-Corporations generally do not require 1099 forms, except for medical
payments or attorney fees. The classification of the business can be determined using the
W-9.

Reporting Payments to Attorneys

Payments to attorneys of $600 or more should be reported as follows:

  • Use Form 1099-NEC for attorney fees paid for services rendered.
  • Use Form 1099-MISC for gross proceeds paid to an attorney related to legal services.

For example, if an insurance company pays an attorney $100,000 to settle a claim, this
amount should be reported as gross proceeds on Form 1099-MISC, without the need for a
separate Form 1099-NEC for the attorney’s fees.

Due Dates for Forms 1099-NEC and 1099-MISC
  • Form 1099-NEC is due to the IRS by January 31, 2024.
  • Form 1099-MISC is due by February 28, 2024, but both forms must be sent to recipients by January 31, 2024.
Other Types of 1099 Forms

Different 1099 forms are designated for various types of income, including:

  • 1099-DIV for dividend income
  • 1099-C for cancellation of debt over $600
  • 1099-K for third-party network payments
  • 1099-INT for interest income exceeding $10
  • 1099-S for real estate transaction proceeds
State Reporting Considerations

The IRS includes Form 1099-NEC in its Combined Federal/State Filing Program. This
means the IRS forwards 1099 information to participating states, so separate state filings
may not be necessary. If a state requires 1099 submissions and does not participate in this
program, you must file separately, following that state’s requirements.

Common Mistakes in Issuing 1099 Forms

Several errors can occur when completing 1099 forms:

  • Failing to include the contractor’s full legal name
  • Incorrectly entering the TIN or EIN
  • Issuing 1099s to employees who should receive W-2s
  • Missing the January 31 deadline for issuing 1099 forms
Penalties for Late 1099 Filings

If a business fails to issue a 1099-NEC or 1099-MISC by the deadline, penalties can range
from $60 to $310 per form, depending on how late it is. There are also maximum fines for
small businesses. Intentional disregard of the requirement to provide accurate payee
statements can result in a minimum penalty of $630 per form or 10% of the income reported,
with no maximum limit.