If your small business works with independent contractors, you may be required to report the amounts you paid last year by the end of the first month of the New Year. This reporting is done by sending 1099-MISC forms to nonemployee workers and filing copies with the Internal Revenue Service. The process of gathering receipts and compiling information can be tedious, but the deadline approaches quickly and there are consequences for being late. So, this is definitely a task you don’t want to leave until the last minute.
First, you must understand that there are several types of 1099 forms:
- 1099-NT — This form is used to report interest income
- 1099-B — This form reports transactions with brokers and barter exchanges
- 1099-MISC — This is the proper form to use for non-employee compensation
You must file a 1099-MISC for each of your independent contractors for amounts paid in 2019, if their compensation was at least $600. You must file Copy A of the form with the IRS and send Copy B to the contractor by January 31, 2020.
Organizations used to have more time to file, but the IRS wanted more time to process the forms, so the deadline was moved up, creating a bit of a crunch at the start of the year. Be aware that you cannot apply for an extension, and there are penalties for filing late.
You should already have complete W-9s for all your independent contractors. The W-9s contain necessary information for completing the 1099s. If you’ve overlooked this step because you didn’t anticipate a contractor earning $600 during the year, you need to ask such contractors to complete a W-9 as soon as possible.
Also, be advised that form changes are on the way. Right now, businesses must use the 1099-MISC to report nonemployee compensation (NEC) in Box 7 of the form. But a business might be required to report other types of payments in the other boxes, and these other types of payments have different deadlines. This causes companies a great deal of confusion. That’s why next year, the IRS will require the new 1099-NEC to report 2020 nonemployee compensation. The deadline to file will be February 1, 2021.
If you’re unfamiliar with these responsibilities and you need reliable assistance, be sure to contact Breon & Associates immediately after the New Year.
Contact Breon & Associates in Harrisburg
At Breon & Associates, preventing fraud is one of our specialties. Our team is comprised of certified anti-fraud experts who work to protect businesses from all manner of security threats. With offices in Harrisburg and South Central PA, Breon & Associates provides business, accounting and tax services throughout Pennsylvania, New York, North Carolina and Florida. Call us at 1-888-516-8476 or 717-273-8626, or contact one of our offices online to schedule an appointment.
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