Understanding 1099 Filing Requirements: A Q&A for Businesses

Businesses of all sizes are preparing to meet important tax reporting obligations – including the filing of Form 1099. Failing to properly issue and file 1099s can result in costly penalties and unnecessary IRS issues. In this article, In-Charge Senior Accountant Bryce Tarletsky, CPA offers a helpful Q&A covering 1099 key requirements and best practices to help you stay compliant, knowing any business is subject to the 1099 reporting requirements.

Q: What is a 1099 Form?

A: Form 1099 is an information return used to report several types of payments made to non-employees, such as independent contractors, service providers, and certain vendors. The most common version is the Form 1099-NEC, which reports nonemployee compensation of $600 ($2,000 beginning in 2026) or more paid during the year.

Other common 1099 forms include:

• 1099-INT for interest paid if $10 or more
• 1099-DIV for dividends paid to shareholders
• 1099-R for payments made from a retirement plan
• 1099-B for proceeds from sales of securities
• 1099-MISC for payments related to rents, royalties, prizes, and other miscellaneous items

Q: Who Needs to File?

A: Businesses must issue a 1099 to any individual or unincorporated entity (such as a sole proprietor, partnership, LLC, etc.) that was paid $600 or more for services during the year. 1099s are reported on a cash basis; you will not include any amounts that relate to accruals (i.e., the services have already been performed, but payment has not yet been made). You typically do not need to issue a 1099 to:

• Corporations – unless the payment was for legal or medical services
• Employees – whose wages are reported on a W-2
• Merchants or platforms paid via credit card (these payments are reported separately by the payment processor via a 1099-K)

Q: What key deadlines should I keep in mind?

A: Here is a list of important dates you need to know:

• January 31^st – 1099-NEC forms must be filed with the IRS and furnished to recipients. 1099-INT, 1099-Div, 1099-R, and 1099-MISC (if box 8 or 10 on the form are blank) are also required to be provided to the recipient by this date
• February 15^th – 1099-B & 1099-MISC (with an amount in box 8 or 10) are required to be provided to the recipient
• February 28 – paper filing deadline for 1099 forms other than the 1099-NEC with the IRS
• March 31^st – electronic filing deadline for 1099 forms other than the 1099-NEC with the IRS

Due to the deadlines above, for some forms, the company is required to give the 1099s to the recipients before they are due to the IRS. The best practice is to handle these at once before the January 31^st deadline. Since you must have the form completed accurately by the January 31^st deadline to provide to the vendor, it makes sense to get this submitted to the IRS at the same time.

Q: What are common mistakes to avoid?

A: There are a few notable mistakes that we see often:

1. Missing or incorrect Taxpayer Identification Numbers. The burden is on the company to provide the correct information to the IRS
2. Reporting payments to incorporated vendors unnecessarily
3. Failing to verify vendor information by using form W-9. The W-9 requires you to get the tax identification number from the vendor
4. Overlooking the electronic filing requirement mandates (required for filers that are submitting 10 or more 1099s)

Q: What are the penalties for noncompliance?

A: Penalties can range from $60 to $310 per form, depending on how late the filing occurs and can be significantly higher for intentional disregard. Ensuring timely and accurate submissions can help avoid these costly mistakes.

1. Up to 30 days late – $60 penalty per form
2. 31 days late through August 1^st – $130 penalty per form
3. After August 1^st – $330 penalty per form
4. Intentional disregard – $660 per form

Q: How can BS&P help?

A: Navigating 1099 filing requirements can be time-consuming and complex, especially as IRS rules change. The BS&P team can assist businesses with:

1. Reviewing vendor records and payments for compliance
2. Preparing and electronically filing 1099 forms
3. Advising on creating internal procedures to streamline future filings
4. Advising on proper worker classification and reporting

Proactive planning and expert guidance can make year-end reporting smooth and stress-free. Contact us to learn more.