If you have one or more independent contractors, you may need to file form 1099-NEC with the IRS. According to the IRS website, the rules regulating when to send out this form are as follows:
- You made the payment to someone who is not your employee;
- You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations);
- You made the payment to an individual, partnership, estate, or in some cases, a corporation; and
- You made payments to the payee of at least $600 during the year.
According to the IRS, if, as part of your trade or business, you made any of the following types of payments, you’ll need to file a 1099-NEC.
- For each person to whom you have paid at least $600 for the following during the year:
- Services performed by someone who is not your employee (including parts and materials)
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
- Payments to attorneys (including law firms or other providers of legal services)
Business owners must file a copy 1099-NEC forms with the IRS no later than January 31, 2023. If you have fewer than 250 1099-NECs to file, you can file electronically or you can send the IRS paper copies. On the other hand, if you have more than 250 1099-NEC forms to file, you’re required to file them electronically. If you do not, you could face a $2,500 fine.
Rules for filing
In addition to needing to file 1099-NEC forms with the IRS by January 31, you must also get these forms to your independent contractors by that same date, so they can start to prepare for their taxes.
If you have questions about whether you need to send out one or more 1099 forms to independent contractors, and/or you have questions about how to issue these forms correctly, we can help. The team of experts at Hughes, Snell & Co., PC, have years of experience helping business owners just like you with all of their tax reporting needs. For more information on our company, or to schedule a free, no-obligation consultation with one of our licensed CPAs, call our office today to get started.