Upcoming 1099 Filing and Reporting Deadlines
For the tax year 2023, the deadlines for filing 1099-NEC forms are as follows:
- January 31, 2024: Deadline for providing copies of 1099-NEC forms to recipients.
- February 28, 2024: Deadline for paper filing 1099-NEC forms with the IRS.
- March 31, 2024: Deadline for electronic filing of 1099-NEC forms with the IRS.
It’s imperative for businesses and individuals to adhere to these deadlines to avoid penalties and ensure accurate reporting.
Purpose of the 1099-NEC
As the tax season approaches, it’s crucial for businesses and independent contractors to be aware of upcoming 1099 deadlines. One particular form that often requires attention is the 1099-NEC. In this article, we’ll delve into the significance of the 1099-NEC and provide insights into the approaching deadlines.
The 1099-NEC is a tax form used to report non-employee compensation. This includes payments made to freelancers, independent contractors, and other self-employed individuals. The term “NEC” stands for Non-Employee Compensation, highlighting its primary purpose – to report income that doesn’t fall under the category of employee wages.
Examples of NEC Reportable Services
At least $600 paid for the following:
- Professional service fees, such as fees to attorneys (including corporations), accountants, architects, contractors, engineers, etc.
- Fees paid by one professional to another, such as fee-splitting or referral fees.
- Payments by attorneys to witnesses or experts in legal adjudication.
- Payment for services, including payment for parts or materials used to perform the services if supplying the parts or materials was incidental to providing the service.
- Commissions paid to non-employee salespersons that are subject to repayment but not repaid during the calendar year.
- A fee paid to a non-employee, including an independent contractor, or travel reimbursement for which the non-employee did not account to the payer, if the fee and reimbursement total at least $600. To help you determine whether someone is an independent contractor or an employee, see Pub. 15-A.
- Payments to non-employee entertainers for services.
See additional examples here: IRS Instructions (01/2024)
Penalties for Non-Compliance
The penalties for not filing Form 1099-NEC (Non-Employee Compensation) or for filing it late can vary depending on the circumstances.
1. Failure to File Correct Information Returns (1099-NEC):
If you fail to file a correct and timely 1099-NEC with the IRS, the penalty can range from $50 to $280 per form, depending on how late the filing occurs. The penalty increases if there is intentional disregard of the filing requirement.
2. Failure to Furnish Correct Payee Statements:
If you fail to provide the correct copy of Form 1099-NEC to the payee by the due date, the penalty can also range from $50 to $280 per form. Like the filing penalty, it increases if there is intentional disregard of the requirement.
3. Small Business Exception:
There is a small business exception for certain filers. If your average annual gross receipts for the three most recent tax years are $5 million or less, the penalties may be lower.
It’s important to note that these penalties are subject to change, and there may be updates or revisions to the tax code. Additionally, the penalty amounts can be adjusted for inflation.
Payments to Attorneys
Payments made to attorneys are typically reported on Form 1099-NEC or Form 1099-MISC, depending on the nature of the payments. However, it’s important to note that the tax reporting landscape can change, and regulations may be updated.
Here’s a general guideline:
1. Form 1099-NEC (Non-Employee Compensation):
Payments made to attorneys for their services, such as legal fees, are generally reported on Form 1099-NEC if the total payments to the attorney during the tax year exceed $600.
2. Form 1099-MISC (Miscellaneous Income):
While Form 1099-MISC has historically been used to report payments to non-employees, including attorneys, the IRS has made changes to the form, creating a separate form (Form 1099-NEC) for reporting non-employee compensation.
However, if the payments to the attorney include other types of income, such as rent, royalties, or other miscellaneous income, those amounts may still be reported on Form 1099-MISC.
It’s crucial for businesses and entities making payments to attorneys to carefully assess the nature of the payments and determine the appropriate form for reporting. If the payments are for legal services, Form 1099-NEC is generally the applicable form.
As the 1099 deadlines approach, businesses and individuals should prioritize understanding the importance of the 1099-NEC form. Accurate and timely filing not only fulfills regulatory requirements but also contributes to a more efficient and transparent tax reporting system. By staying informed and organized, taxpayers can navigate the upcoming deadlines with confidence.