Who needs a 1099? {1099-NEC Explained}
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- เผยแพร่เมื่อ 30 มิ.ย. 2024
- Error Correction:
There was a version of this video that stated that lawyers/attorneys would need a 1099 regardless of the amount paid (i.e. even if it was under $600). That is INCORRECT. Only payments made over $600 need a 1099 - even for lawyers. This has been edited out of the video. However, one thing you need to keep in mind for lawyers is that you need to send a 1099 to them even if they are a corporation. All other contractors can be excluded from 1099 reporting if they are a corporation (S or C Corp).
1099 reporting is due January 31st for all businesses. This does not give business owners a ton of time to pull together their data and report it to the IRS. Avoid penalties and get your 1099s in on time!
In this video we cover what you need to know about the 1099s you need to give to non-employee compensation (reported on form 1099-NEC). Here is the IRS form 1099-NEC: www.irs.gov/pub/irs-pdf/f1099...
Who should get a 1099?
- Individuals or businesses that have provided services to a company
- Over $600 for MOST services
- A Corporation (S or C corp) - these do not need a 1099
- If they file as a S corp or C corp - then they do not need a 1099
Don't get hit with penalties for misunderstanding and underpaying your taxes. Save money and stress by getting this right every year!
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Hannah Smolinski is a #CPA and the Founder of Clara CFO Group. Find out more about Clara CFO Group at claracfo.com/
Disclaimer: This video is intended for educational purposes and
should not be taken as legal or tax advice. You should consult with your financial professionals about your unique financial situation before acting on anything discussed in these videos. Clara CFO Group, LLC is providing educational content to help small business owners become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience.
Had no idea about the exemption at all amounts for lawyers. Pls keep these tips coming! So many small business owners and sole props who have to do it all themselves don't know a lot of this, and learn as they go, sometimes too late.
Will do my best! Thanks for watching!
thank gosh that helped my situation when I was given the 1099-NEC from my boss. My mom was yelling at me for a w-2 and now she can understand why. Thank you so much for this video!
Glad I could help!
Thanks Hannah. Great video. This really answered a lot of questions I had
Great!
This is the best video I found about 1099 Clara. Awesome Thanks.
Wow, thank you!
Super helpful, thank you so much for sharing your wisdom and experience.
So glad it helped!
Very useful and straightforward. Thank you.
Thanks for watching!
This is so useful. Thank you!!
You are the best, breaking down nicely 😃
Thank you! 😃
Thanks Hannah this was awesome, and I found it exciting, lol.
Thanks for the clarification.
Very thorough. Thank you.
Glad it was helpful!
Hi! Found this video very helpful. I will be back for more!!!!
so glad we can help! make sure you are subscribed and get notified for new videos!
Good stuff!
Thank you!
One more thing as it just came to mind! You mentioned that software was excluded from 1099 reporting requirements. Does that also include SaaS companies?
Yes. Unless that company is performing services (i.e..intuit bookkeepers doing your bookkeeping... but then they'd be a corporation and wouldn't need a 1099)
Amazing video! Thank you so much 🙏🏼 I live in Washington state, but my contractor lives in the UK, would I still request a W-9 and send a 1099 if they aren’t a S-Corp?
Does the UK contractor have a US tax paying obligation? Are they a US citizen living/working in the US? Only US persons/entities will be needing a 1099.
Thank you!!!
Holy shit thanks for the explanation, Clara! Just to clarify, if I send an NEC form to the IRS saying I paid "X attorneys, YYY$" ----do I also have to send the attorneys a copy of that NEC form(filled out, still saying "I paid you guys YYY$ in 2021"?
Yes, the attorney you paid will get a copy of what they received from you, and the irs will get a copy of all the 1099s you paid to all your contractors.
@@ClaraCFO Kickass, thanks for the clarification!
Thank you Hannah, this is really helpful information. I have question. We are a small performing arts organization and rent venues for performances. Do I need to provide a 1099 to the venues also?
Thank you!!
Rent paid would go on a 1099-MISC form.
Questions: 1- For 1099 nonemployee compensation the amount they put on that box should I pay 25% of that amount? 2- I worked remotely will I need to pay state tax as well? 3- Last question the amount I will pay should I put that under FEDERAL INCOME TAX WITHHELD in the form?
As a individual contractor, (doing some side work) I wanted to know why I needed to produce a W-9 with my taxpayer info. Thank you!
Wow! She's AMAZING!
Thanks!
You bet!
Excellent video! Question: As a LLC disregarded entity I do 1 service for under $600 for a private individual. How do I report that income at tax time? Or does it not need to be reported because it’s under $600? Two scenarios: #1 person pays my LLC with a personal cheque; #2 person pays my LLC by credit card.
Hi Jason - you always need to report all income you receive for your services regardless of whether or not you receive a 1099. It's the payer's job to send a 1099 to you (if your services warrant one), but it's your job to report all service income to the IRS whether or not you got a 1099. Most of the time contractors won't have 1099s to support every dollar of income.
Thank you for this video, Hannah! I'd like to clarify the $600 ruling, is it per payment or cumulative amount for taxable year? Like if I pay $500 for August 2021, then another $400 for Sept, now it has a total of $900. will it be subject to 1099-NEC for 2021? Hope for your response.
Cumulative! So in your example, you'd need to consider that person/business for a 1099.
@@ClaraCFO Thanks so much!
Thank you so much for your video! Such a lifesaver! I have a question, some of our contractors mid-year went from Sole proprietors to S-Corp. Do I need to only report the payments incurred before that date? Thank you for your help!
I'd be surprised if those companies didn't retroactively adjust their S Corp status to the entire year, so their effective dates should be 1/1 for the S corp status. this would mean you don't have to send 1099s for them. You can file the paperwork mid-year, but people typically do a retroactive election date.
My husband is a S-Corp and received a 1099-NEC, even though we gave them a W-9 indicating he is a S-Corp. I’m confused why he received it.
@@long1034 I still get them too even though I shouldn't get them. Some people don't do this review. It doesn't hurt you to get them even if you shouldn't.
@@ClaraCFO Thank you. From my understanding watching your video, since I am a S-Corp, I do not need to send a 1099-NEC to someone who is a S-Corp. If I’m a single member S-Corp and I paid someone who is also a single member S-Corp, do I need to file a 1099-NEC to the IRS?
Hi love your videos, pls i have a question, do you need to issue a 1099 to the independent contractor if you pay the person through Google pay ,apple pay ,or payoneer
Great info, thanks. My CPA tells me not pay anyone before I get their W9.
That is best practice!
Hi Clara, thanks so much for providing this. Great video. I was just looking at the IRS instructions for the Form 1099-NEC (Revised January 2022) and it says the following: "Payments to attorneys. The term “attorney” includes a law firm or other provider of legal services. Attorneys' fees of $600 or more paid in the course of your trade or business are reportable in box 1 of Form 1099-NEC, under section 6041A(a)(1)." Based on this, it seems like if the amount is less than $600, it doesn't need to be reported. Is that true or am I missing something? Thanks a mil!
Sarah thanks for bringing this up! I'll look into it and edit the video if I need to!
Under 600, you don't report. Although, it won't hurt if you report everybody...even corporations. Remember, if in doubt, report.
@Jose B is correct. I am editing the video. I incorrectly heard something talking about the attorney caveat. The actual caveat for lawyers is that you need to report lawyers even if they are corporations! I am current out the error in the video, but I will update the description with the correct information. I appreciate you both bringing this up!
You need W-9 before you make payment. I believe that you have to withhold 20% if they fail to furnish the W-9. If you wait until year-end, then they MAY refuse to furnish SSN. Under audit IRS will disallow payment without 1099. CA requires that you report W-9s within three weeks of payments
Thank you so much. Is business Paypal also excluded?
PayPal will issue a 1099-k for payments made through the platform.
So this year I did some independent contracting work this year and will receive a 1099 for said employment. I used the app smartasset calculator to deduct what would or should of been my taxes to be safe. Any thoughts on this application?
I haven't used it, but there are a lot of great financial calculators available online! Remember that they are only as good as the data you put in (garbage in, garbage out)!
I done understand box 2 ❤
Even if I pay less than $600 or pay by credit card, i still need to write this off. How do we report it on schedule c if we are not sending 1099? "Contract labor" ?
@claracfo - do a landlord with no llc needs to file 1099 NEC for repairs more than the threshold? Is he considered a ‘business’ entity ?
If I got a 1099-Misc instead of a 1099-NEC, can I still file using the amount $ that use to be in box 7? Or do I need to contact the issuer to send the correct form to me?
Just file with the current 1099. It's the payer's problem that they used the wrong form. Just report the amount you received properly on your taxes.
Hi Hannah! A friend wanted to help me out during a time when I was out of work. He decided to do it through his business and as a result I received a 1099-NEC. I wasn’t considered a personal contractor nor did I do any business for him so what do I label my reason for receiving this form as?
Hi Tamika, it sounds like he claimed it as a business expense. I would check with him to see why you got the form. If it was a gift to you (under IRS gift limits), then you shouldn't have received a 1099.
@@ClaraCFO Hello newbie here lol!, mine is a little different. The LLC brought me on as a IC, a caregiver. I received a 1099-NEC however I am confused what to do with it. I'm tax exempt and I don't see it on a 1040 form to claim. Do I file a Schedule A or a form 982? or is it for my records only?
So both self-employed side hustle doing biz, niether has LLC, do they need to file 1099? Thank you!
Hi Michelle, are you saying that you've hired these people and they are doing side-hustles? If so, then yes, if you've paid them more than $600 and not on a credit card, then you need to give them a 1099. They need to fill out a W9 and give you their tax info. This is all if you want to be able to write off the expense in your business as a deduction.
I am an independent contractor and get 1099s from my clients that pay by check or eft. However most pay by credit card. I have never received a 1099k. Now I also do not earn over 20k per client. So should I get a 1099 nec?
Hi Clara, Individual who is helping us provided Social media marketing would be eligible for 1099?
What if you hired someone and need their info but they refused to give you their info or you cant get ahold of them?
I recommend getting a W9 from any person you work with BEFORE working with them. This will avoid the problem in the future. However, here's a great blog from a trusted CPA about what to do if someone refuses: amynorthardcpa.com/contractor-refuses-w-9/
What is the difference between paying someone for a service 1099 or a business expense?
You issue 1099s for services that are paid for by the business. So these are services that are legitimate business expenses, and you need to issue 1099s for those services (within the rules mentioned in the video).
Clara and everyone, I just had a meeting with the bookkeeper and the bookkeeper said that the change for 2020 has banks track and issues 1099s for us. No W9 is needed because banks already know Social Security numbers and EINs. Can you confirm?
Hi Killroy - I am not clear what your bank is talking about. Do you think they were talking about credit card transactions? You don't need to issue a 1099 for payments made by a credit card...maybe that was it?
@@ClaraCFO , I believe banks, credit cards, money apps are required to issue 1099s
If we received a 1099-nec when do we pay those taxes? The following year. Ex; if we got paid from the business owner in 2021 and receive the 1099-nec in 2022 do we pay the first quarter for that on april 15th 2022?
Hi Lupe - you receive a 1099 in the year AFTER the earnings were earned. So if you got it in 2022, then you need to report those earnings of your 2021 tax return (due april 15th). Sorry this response is so late!
I have a tax business with tax pros, I pay them commission. Do I add on the expenses where I paid commission or do I input the income on the contract labor line
I am not sure I understand. A 1099 would be what you PAID to a contractor. I may not understand how tax pros works?
I am not a business woman.I have no idea about form of taxes.All I know as a employee is W2.Then suddenly my employer asked me that they don't deduct taxes and then they don't even explain to me that I am the one paying taxes in the IRS.I am scrolled up.I thought all employer provide W2 to their employee.They paid me hourly.Please help me of my confusion about 1099 NEC.Now is Feb.my 1099 NEC was due.huh.headache.i don't even know about this.
My question is if these people are family . I run a respect care service. I went on two vacation. Last year. I paid my son and a neice to care for my mother. During this time. They both made over 1000 by the end of the year. I paid them with cash .but one of them did do the work. She took the money but did not show up for work. I had to pay the other person more money to do her shifts. What form do i do if i paid her and did not do the work?
I am an individual who needs moderators for website content on my website.
I understand I can pay others up to $600 annually without issuing or receiving documentation.
If I pay over $600 to an individual, I must issue a 1099-NEC to the other individual?
i.e. The website is a hobby that generates income for me. I sometimes need additional moderators.
I worked few days for nursing agency. There is about $3000, but the agency doesn’t give me the 1099. How can I do my income taxes return? Thank you for your response.
Hi! You still include that income in your report to your CPA (or whoever is doing your taxes). Most people don't have complete 1099s, but you still need to report any income regardless of whether or not you got a 1099.
@@ClaraCFO Thank you for your response. As long as I can do my taxes return. I am happy for it. I just worry I can not finished the taxes return without the 1099.
@@aliu244 You can definitely finish your return without that 1099. Just report the income to the tax accountant - if you have an invoice or proof of payment from the customer, that's what the IRS would need in an audit! Lots of contractors never get 1099s when they should! So don't worry :)
@@ClaraCFO Thank you so much
So if it’s a vendor who you buy material from they don’t get a 1099?
Correct, this is for contractors that provide services (non employee compensation)
Look I get payed by a w2 at my business i work for and somehow I got a 1099nec ??? For money I never received what do I do?? Please reply!
Is it for the same amount? I'd contact your employer and ask why you received it.
@@ClaraCFO its not for the same amount. And I didn't get payed the money they try to say I got payed
Ok I don’t know if you will see this because this video is two years old but I received a 1099 NEC because I want a case with EEOC do a file it or do the company
I also received it in February by two weeks after I receive my W-2 from them
I was sent a 1099-NEC but I’m confused. They sent this to apartment maybe they meant to send it to the pervious tenant.
The 1099 should say who it is for and who it is from. Does it have your name on it?
@@ClaraCFO Cire brokerage services
Does not have my name on it only my address and apt number.
@@mollynavarro4101 yeah - that is very strange. If you have nothing to do with that company, then it is probably a mistake.
If you are the owner of the business and you paid yourself.... Do you issue yourself a 1099 NEC?
No! 😊
Hello! Please help me-
My employer gave me a 1099 and did not expect this at all, I ALSO got a w2 with the same employer!
I am so confused and frustrated, I just found out and will be asking my employer questions but just hoping you could give me some clue? Before I ask them questions about it- it would mean a lot if you helped! Thank you for what you do
This means that they were paying you as a contractor and an employee in the same year. Do you remember having any kind of conversation with them about this change? Or did you start getting paid with taxes withheld? It does happen for some people where they start as a contractor and move to employee status.
So even if I do not have a legit biz can someone give me a 1099 nec
If you do work for someone that is over $600, you will need to report that income to the IRS - so yes, even if you don't have a business license, you can still receive a 1099 as an individual.
Hello, I received 1099-NEC, its through autozone. My daughters father used to work there, and he passed away last yr on March. So I received money through them as survivor benefits. So im not sure how to report it.
We were never married as well.