Many business owners grow accustomed to having flexible deadlines in their work. Sometimes dates must change due to product delays or client wishes. But when it comes to taxes and the 1099 deadline, there is no flexibility. And February 1, 2021, is coming quickly.
For help with your 1099s and other bookkeeping needs, reach out to the experts at Fisher Bookkeeping. The upcoming tax deadlines don’t have to fill you with dread. We have you covered, so let’s connect and get started.
Typically, you must deliver most 1099s to the recipients by January 31. But since that date falls on a Sunday in 2021, the deadline is February 1, 2021. You get one extra day!
This date is set in stone unless you apply for and receive an extension. So it’s crucial that you start preparing for the process now. Failure to meet tax deadlines will likely result in penalty fines.
Any independent contractor or small business you paid $600 or more during 2020 will need a 1099. This form allows the IRS to reconcile the money you pay to a vendor with the income they claim on their return.
In the past, the 1099-MISC was necessary for most situations. But for the tax year 2020, there is a different form in play, the 1099-NEC. This form is for non-employee compensation that used to go on the 1099-MISC.
Here is a quick overview of who should receive these forms.
This form used to be a bigger catch-all for reporting income. Now it primarily goes to anyone who you paid $600 or more for:
There are some exceptions to the $600 threshold:
The non-employee compensation version of the 1099 is actually an old form that the IRS resurrected for the 2020 tax year.
Many people who formerly received the 1099-MISC will now get a 1099-NEC. You need to send a 1099-NEC to payees if the payments meet the following conditions:
The first rule as you get ready to send and file your 1099s is DO NOT WAIT until January to start this process. Start the work now so that you are not feeling stressed as the deadline approaches. Here are the smaller tasks to do as you get ready to distribute and file your company’s 1099s.
Any vendor or non-employee that you will be paying should fill out a W-9 for you to keep on file. Unless you are certain you won’t reach the $600 mark, make sure they return a W-9. This will save you the distress of trying to track them down as you get closer to the deadline.
The 1099 forms are not downloadable from the IRS website. Instead, they print them in triplicate, and you need to order the forms ahead of time. Don’t wait until you are short on time to get your necessary 1099s.
Sometimes, you can pick up forms at your local post office, but their supplies tend to dwindle quickly. Alternatively, you can order them from some office-supply stores or a financial software provider, such as Quickbooks.
You will need the following information to include in each 1099:
Mail or hand-deliver Copy B of the 1099s to their recipients by the deadline. And then, fill out IRS form 1096, which summarizes the information from the 1099s.
You need to file this for your 1099-NEC forms by February 1, 2021. For the MISC forms, you must file by mail by March 1, 2021. If filing electronically, the deadline is March 31, 2021.
Some states, such as Oregon, require electronic filing. So when you use an efile service, it will file with the IRS and the state. It will also send a copy to the vendor by snail mail, as required.
If you fail to meet the 1099 deadline, you will face penalty fees. Depending on how late you file, the fine can range between $30 and $100 per form. These fines have a cap of $500,000 per year, assuming you do eventually file the forms.
A business that completely disregards the requirement to provide this information can face fines of $250 per form. In this instance, there is no cap.
Owning a business does not mean that you have to do everything for your business. Outsourcing to a bookkeeper is one of the simplest ways to take something complicated off your plate.
If you’d like to learn how the team at Fisher Bookkeeping can help you and your business, get on our schedule today. We love serving clients as they grow and thrive. From our offices near Lexington, KY, and in Portland, OR, we help businesses around the nation.
Barb is the CEO of Fisher Bookkeeping, an outsourced bookkeeping consultancy that provides small businesses with a full-service financial department. Her favorite aspect of work is to break down the accounting to meaningful bits, so entrepreneurs can make a powerful difference in their own business. She's also a power lifter (squat: 215, DL: 270).