As 2021 winds down, we want to share some key information related to Forms 1099. These tax documents are required to be filed with the IRS at the end of each January for the preceding calendar year. To avoid penalties for filing a late or inaccurate Form 1099 you should consult with your tax advisor to ensure compliance with the Internal Revenue Service rules.

Overview

There are different types of 1099s that your business, or you as a sole proprietor, may be required to file with the IRS. The due date for Forms 1099 applicable to calendar year 2021 is January 31, 2022.

Below are examples of Forms 1099 that you may be required to file. Note that this list is not inclusive of all types of Form 1099:

1099-NEC: used to report Non-Employee Compensation (NEC) paid in excess of $600. A payment is considered NEC if you made a payment to someone who is not your employee but performed work for you, such as an independent contractor.

1099-MISC: used to report types of income that are not considered NEC, such as Royalties, Other income payments, and Nonqualified Deferred Compensation, among other types of income. Royalty payments in excess of $10, and payments in excess of $600 for other income types, trigger the requirement to file Form 1099-MISC.

1099-INT: used to report Interest Income payments in excess of $10, or in some cases, $600.

Do I have to file 1099s for tax year 2021?

You are required to file Forms 1099 if you made payments over the above-indicated dollar amounts in the course of your trade or business to an individual, partnership or estate.

What information do I need from the payee to file Forms 1099?

If you are required to file Forms 1099, you will need the following information from the payee:

• Legal name used for Federal income tax purposes
• Address
• Federal Employer Identification Number or Social Security Number, whichever is applicable

The best way to obtain the information needed is to ask your vendors and payees to complete a Form W-9, which can be found here.

If you believe that your business or you as a sole proprietor may be required to file Forms 1099 for tax year 2021, consult your tax advisor. Neitzel Luke & Salopek Inc. is available to answer any questions you have and to prepare your Forms 1099. We can be reached at (440) 835-1040 or email Lisa Parente, Tax Manager at LParente@nlacpas.com to get in touch.

Sources: Instructions for  Forms 1099-MISC  and 1099-NEC (2020) | Internal Revenue Service (irs.gov)