Scribd
Upload
16 views22 pages

Form - 1099 NEC Presentation 2

Uploaded by

grover.nikhil29
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
16 views22 pages

Form - 1099 NEC Presentation 2

Uploaded by

grover.nikhil29
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 22

FORM - 1099

Prepared by – Kapil Upreti


What is form 1099?

 Form 1099 is a series of tax forms used in the United States to report various types of
income other than wages, salaries, and tips. It's typically issued by a business or
financial institution to report payments made to non-employees (e.g., independent
contractors, freelancers, vendors, or investors) over the course of the year. The most
commonly used version is 10 9 9 - N E C, which reports non-employee compensation, but
there are many other variations for different types of income, such as 1099-MISC, 1099-
DIV, and 1099-INT.
 The IRS has reintroduced form 1099-NEC as the new way to report self-employment
income instead of form 1099-MISC as traditionally had been used. (If you are self
employed, you can expect to receive this new form from a business that paid you $600
or more for non-employee compensation in tax year 2020 or later.
What kinds of Forms are under 1099?

 1099-NEC: Non-employee compensation (for contractors and


freelancers).

 1099-MISC: Miscellaneous income (for rent, royalties, prizes, etc.).

 1099-DIV: Dividends and distributions from investments.

 1099-INT: Interest income.

 1099-B: Sale of securities (stocks, bonds, etc.).

 1099-R: Distributions from retirement accounts (401k, IRAs).

 1099-G: Government payments (like unemployment benefits).


What is NEC (Non-Employee Compensation)?

• The IRS Explains that in general, you must report payments you make if they
meet the following condition.
 The payment is made to someone who is not your employee.
 The payment is made for services in the course of your trade or business.
 The payment is made to an individual, partnership, estate, or corporation.
 The payment total is at least $600 for the year.
What are the things including in NEC?

 Fees.
 Benefits.
 Commission.
 Prizes and awards for services performed by a nonemployee.
 Other forms of compensation for services performed for your trade or business by
an individual who is not your employee.
Why the 1099-NEC Was
Reintroduced?
 Prior to 2020, non-employee compensation was reported on Form 1099-MISC, but this
created confusion since the 1099-MISC form was used for multiple types of income.

 The IRS reintroduced the 1099-NEC form to simplify reporting and ensure clearer
distinctions
between various types of income.

 Reintroduction of the Form: The 1099-NEC is now required to report payments of


$600 or more made to non-employees (independent contractors, freelancers).

 Form 1099-MISC Adjustments: Non-employee compensation (Box 7 on the 1099-MISC)


is now reported on the 1099-NEC instead of the 1099-MISC. Box 7 on the 1099-MISC
is no longer used for this purpose.
What are the required information for
1099-NEC form?
 Payer’s Information: Name, address, and taxpayer identification number (TIN)
(business EIN or SSN).
 Payee’s Information: Name, address, and taxpayer identification number (TIN or SSN) of
the recipient (independent contractor, freelancer).
 Amount Paid: Report the total amount of non-employee compensation paid to the
contractor during the tax year. This amount is reported in Box 1 of the form.
 Other Details: Any withheld federal income tax (reported in Box 4, if applicable) or state
income tax.
What are the deadline for Filling 1099
NEC?
 January 31: The form must be sent to both the IRS and the recipient by January 31
of the year following the tax year for which the payment was made. This is a hard
deadline with no extensions available for submitting 1099-NEC forms.

 Electronic Filing: If filing electronically with the IRS, you may have a later deadline
(usually March 31), but the January 31 deadline for sending the form to recipients
still applies.
What are the penalties?
 Late Filing: If you file the form after the deadline, you could face penalties
ranging from $50 to $550 per form, depending on how late the form is.
 Incorrect Information: If the information on the form is incorrect, you may be
subject to additional penalties unless you correct the form in a timely manner.

How we can avoid penalties?


 File the form by January 31.

 Report all payments of $600 or more to non-employees.

 Use accurate information for both the payer and recipient.

 Correct any mistakes promptly


What is State reporting?

 In addition to federal requirements, some states require that 1099-NEC


forms also be filed with the state tax authority, especially if the contractor
is located in that state.
 Check state-specific filing requirements to ensure compliance.
What are the Additional
Considerations?
• Independent Contractors: Only report payments to independent
contractors who are not employees. Employees are reported on Form W-
2, not the 1099-NEC.
• No Withholding Required: Generally, if you pay a contractor, you're
not required to withhold taxes, but if you fail to provide a W-9 or the
contractor refuses to provide one, backup withholding may apply (usually
at 24%).
• Correcting Errors: If you find an error on a 1099-NEC after filing, you
must submit a corrected 1099-NEC to both the IRS and the recipient. This
is done by filling out the form with the corrected information and
checking the box indicating it is a corrected form
How we can Submit the form to IRS?
 Electronically (E-Filing)

i. IRS FIRE System: If you are filing 100 or more 1099 forms, you must file
electronically using the IRS FIRE (Filing Information Returns Electronically)
system.
ii. Third-Party E-Filing: Many businesses choose to use third-party e-filing
services (such as QuickBooks, TurboTax, or other tax software) to submit the
forms online. These services typically charge a fee, but they handle much of
the process for you.
 Paper Filing

i. You can also file by mailing paper forms to the IRS. However, paper filing is
generally slower and can result in delays. If you choose paper filing, ensure
that you use the correct 1099-NEC form (not a copy you print from online; the
IRS provides specific forms for paper filing).
How to file 1099-NEC from QuickBooks
Online?
 Open QuickBooks Online by visiting https://accounts.intuit.com/
 Go to the “Expenses” tab and click on “Vendors”.
 Select the vendor from the list for whom you want to prepare 1099 NEC.
 Go to “Edit” at the bottom right and under “Additional Info” check the box for “Track Payments for 1099”.
 Go to the “Payroll” tab and click on “Contractors”.
 Select the vendor and click the “Add” button in personal details section to update their information.
 Update the Basic Business information including Business name, Employee Identification Number (EIN),
email, address, city, state and zip code.
 After updating the W-9 detail click on the prepare 1099S.
 For reference snapshot is attached in the next slides.
How prepare 1099 NEC?
• Click on the tab “Confirm info and start filing”

• After that select account from the next Window.


 Select the chart of accounts from the list
 Apart from this you can select the vendor
by the expenses.
 Review Recipients and payment totals.
 Select the Contractor/Vendor from the above list and click
on next.
Preview of Form 1099 NEC
Next to proceed for payment
THANK YOU

You might also like