2024 Form 1099's: What You Need to Know

The reporting deadline for mailing and filing Form 1099s is January 31, 2025. If your business made any payments that require a Form 1099 to be issued, please advise your Revonary professional of this before the filing deadline. 

IRS Form 1099 is an informational reporting form required to be filed with the IRS by businesses that pay $600 or more to independent contractors or freelancers for services rendered during the tax year.

What Do You Report on Form 1099?

Employers must use Form 1099-NEC to report nonemployee compensation. According to the IRS, Form 1099-NEC is used to report payments for services — not goods — related to operating your business or trade. The form should never be used for personal payments and is generally required only for unincorporated vendors, such as sole proprietors or partnerships, when you’ve paid them at least $600 in a given year. Payments to most corporations are exempt, except for specific services such as legal fees.

For example, paying $800 to have a national chain like American Computers, Inc., install software on your IT system would not need to be reported. However, hiring John Doe IT Services, an independent contractor, to do the same work for the same price would require you to issue a Form 1099-NEC. If you purchased a new server from John Doe IT Services, you would not need to submit a 1099, as the payment was for a product, not a service.

How to Determine Whether You’re Required to File Form 1099

The IRS test to determine whether payments qualify for 1099-NEC reporting requires that all of the following conditions are met:

1. The individual or entity is not an employee. Payments must be made to an independent contractor or a similar entity, not to someone classified as your employee.

    

2. The payment was for services provided to your business or trade. Payments for personal services or goods are excluded.

    

3. The payment was made to an individual, partnership, limited liability company (LLC), or estate. Payments to corporations are typically excluded, except for specific services like legal fees.

    

4. The total payments during the year were $600 or more. This threshold applies to the cumulative amount paid to the same vendor for qualifying services.

Examples of professional fees that typically require 1099 reporting include those paid to architects, engineers, lawyers, contractors, and landscapers.

What You Need to Do

To ensure your 1099s are prepared on time, please provide a list of your vendors that meet the criteria above, including their address, Social Security Number (SSN) or Employer Identification Number (EIN), and the total amount paid to them during 2024. You can download an Excel file to input this information and send to your Revonary professional here: 

Don’t have this information from your vendors? Send them a W-9 Form requesting it. 

Click here to download a blank W-9 form. It’s best practice to request that vendors complete this form before making any payments for their services, although this can be completed after you’ve started working together. 

2024 Form 1099 Deadlines & Penalties

Failing to file a correct 1099 information return by the due date without showing reasonable cause may result in significant penalties. 

These penalties apply in several scenarios, including:

• Failing to file on time.

• Omitting required information on the 1099 return.

• Including incorrect information.

• Filing paper forms when electronic filing is required.

• Reporting an incorrect Tax Identification Number (TIN) or failing to report one.

• Submitting paper 1099 forms that are not machine-readable.

The penalty amount depends on when you file the correct information, as follows:

1. Filed within 30 days of the deadline (by March 30 if the due date is February 28):

   • $60 per return.

   • Maximum penalty: $664,500 per year ($232,500 for small businesses).

2. Filed more than 30 days after the deadline but by August 1:

   • $130 per return.

   • Maximum penalty: $1,993,500 per year ($664,500 for small businesses).

3. Filed after August 1 or not filed at all:

   • $330 per return.

   • Maximum penalty: $3,987,000 per year ($1,329,000 for small businesses).

4. Intentional disregard of the filing requirement:

   • $660 per return.

   • No limit on the total penalty amount.

It’s crucial to ensure 1099s are filed accurately and on time to avoid these costly penalties. Please contact us as soon as possible so that we can assist you with the preparation of your 1099s. 

Important Dates for Your Calendar – Form 1099’s & 2024 Tax Season

January 31, 2025 – due date to mail recipient copies for 1099-NEC and 1099-MISC

January 31, 2025 – due date to send Copy A to federal agency electronically (1099-NEC to IRS)

March 31, 2025 – due date to send Copy A to federal agency electronically (1099-MISC to IRS)

If you have any questions regarding any of the information above, please do not hesitate to call our office or email your Revonary professional.