1099s

What is a 1099

It’s a tax document for independent contractors and freelancers, as it details the income they’ve earned throughout the year. Unlike a W-2, which reports income paid to employees, the 1099 is used to report payments made to non-employees.

Types of 1099s

There are several versions of the 1099 form, for our purpose we will only be looking at the two below:

• 1099 – Misc: Reports miscellaneous income, such as rent, royalties, and non-employee compensation.
• 1099-NEC: Specifically used for reporting payments of $600 or more to independent contractors.

When to Issue a 1099

• Non-Employee Compensation: If you pay an independent contractor or freelancer $600 or more in a calendar year for services provided, you must issue a 1099-NEC.
• Rent Payments: If your business pays $600 or more in rent to an individual or entity that is not a corporation, you must issue a 1099-MISC.
• Other Income Payments: Various other types of payments, such as medical and health care payments, attorney fees, and gross proceeds paid to an attorney, if they meet the $600 threshold, should be reported on a 1099-MISC.

Exceptions to Issuing a 1099

• Corporations: Payments made to corporations generally do not require a 1099, with exceptions including attorney fees and payments for medical or health care services.
• Employee Wages: These are reported on a W-2 form, not a 1099.
• Payments via Credit Card or Third-Party Network: These are reported on a 1099-K by the payment processor, not by the church making the payment.

Issuing 1099s

The 1099 needs to have all related payments to the individual/entity for the prior year. The deadline to submit 1099s to the individual/entity is January 31st and to the IRS the last day of February (or March 31st if filing electronically).

Summary

If you pay an individual or entity at least $600 during the year you will need to issue them a 1099 unless they fall under one of the exceptions.

Does Guided Insight Handle the 1099s

Absolutely! If you have payroll with us this headache will be taken care of.