by Tania Vallarta, Megan Goldstein & Leonor DiStefano
Every January, businesses must issue Form 1099-Misc or 1099-NEC to non-incorporated entities or individuals who they paid at least $600 by a method of payment other than credit card for performing a service to their business. Keep reading for best practices to help you stay in compliance!
As soon as you engage a service provider and before you pay them, have them complete a form W-9. This provides you with the information needed to prepare the Form 1099 (if required) including the name, address, tax identification number and type of entity.
Review the completed W-9 from your service provider. If they are working as an individual and do not have a formal business entity, they should provide their Social Security number (SSN). If they have an Employer Identification Number (EIN) from the IRS, that is the number they should provide on the W-9 along with the complete business name as it appears on the IRS records, and the type of entity they are.
A 1099-MISC or 1099-NEC is issued to a service provider who you have paid at least $600 or more in the calendar year. Corporations and S-Corps do not receive 1099s.
Yes, Limited Liability Partnerships (LLPs) do receive 1099s. If you make payments of $600 or more to an LLP for services during the year, you are required to file a Form 1099-MISC for those payments. This is because LLPs are considered non-corporate entities, and payments to non-corporate entities generally require a 1099 to be issued.
Late filing penalties vary by how late you file. Below is a chart that breaks this down. Be aware that these charges are PER EACH RECIPIENT FORM.
Year Due | Up to 30 Days Late | 31 Days Late Through August 1 | After August 1 or Not Filed | Intentional Disregard |
2023 | $50 | $110 | $290 | $580 |
You can find much more information on the IRS publication. If you still have questions feel free to reach out to one of our Wiss members. And, if you don’t have W-9 forms on file now from your service providers, please request them and get a jump on your compliance!