I am a business owner. I have independent contractors working for me. Do I need to issue any tax forms at the year-end to these independent contractors and/or the IRS?

If you pay independent contractors, you may have to file Form 1099-NEC, Nonemployee Compensation, to report payments for services performed for your trade or business.

File Form 1099-NEC for each person in the course of your business to whom you have paid the following during the year at least $600 in:

  • Services performed by someone who is not your employee; (including parts and materials) (box 1); or
  • Payments to an attorney (box 1).

You must also file Form 1099-NEC for each person from whom you have withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.

What is the deadline for filing Form 1099-NEC?

Businesses are required to complete a Form 1099-NEC by January 31 (or the next business day if the deadline falls on a weekend or holiday) to report payments of $600 or more made in the previous tax year to each nonemployee who performed services for them.

What information is required on Form 1099-NEC?

Form 1099-NEC is a fairly short form with multiple copies. The information on Form 1099-NEC includes: Payer’s information, including name, address and taxpayer identification number (TIN). Recipient’s information, including name, address and TIN.

What documentation should I collect from my contractors when I hire them to be compliant?

When hiring contractors, it is important to collect certain documentation to ensure compliance. Here are some key documents you should collect from your contractors:

  1. Proof of Registration: Contractors should provide proof of registration, which can be obtained from the appropriate government agency or website.
  2. Proof of U.S. Citizenship or Lawful Permanent Residency: If the contractor is foreign-born, they should provide proof of U.S. citizenship or lawful permanent residency status, such as an Alien Registration Number (A Number).
  3. Background Investigation Forms: Contractors may be required to submit background investigation forms as part of the compliance process.
  4. Credit History: Contractors may need to provide information regarding their credit history.
  5. Federal Bureau of Investigation (FBI) Fingerprint Results: Contractors may be required to undergo fingerprinting, and the results should be provided as part of the compliance documentation.
  6. Prior Federal Government Background Investigations: Contractors may need to provide information about any prior federal government background investigations they have undergone.

It is important to note that these requirements may vary depending on the specific regulations and guidelines applicable to your industry or the nature of the contract. It is advisable to consult the relevant authorities or legal professionals to ensure full compliance.

Can I e-file Form 1099-NEC?

Yes, you can e-file Form 1099-NEC. The IRS provides electronic filing options for various information returns, including Form 1099-NEC. You can use the IRS Filing Information Returns Electronically (FIRE) system or the IRS Affordable Care Act Information Returns (AIR) program to electronically file Form 1099-NEC. These electronic filing options offer a convenient and efficient way to submit your forms to the IRS.

To access the FIRE system or the AIR program, you can visit the IRS website at www.IRS.gov/FIRE or www.IRS.gov/AIR, respectively. These platforms provide instructions and guidance on how to electronically file your Form 1099-NEC.

It is important to note that if you choose to e-file, you do not need to submit paper copies of Form 1099-NEC to the IRS. However, you may still need to provide copies to the recipients of the payments.

For more detailed information and instructions on e-filing Form 1099-NEC, you can refer to the official IRS instructions for Forms 1099-MISC and 1099-NEC on the IRS website.

What is the penalty for not filing Form 1099-NEC?

The penalty for not filing Form 1099-NEC or not correctly reporting the information can vary depending on the circumstances. The law provides for penalties for failure to file information returns, including Form 1099-NEC. The penalties can range from $50 to $550 per return, depending on how late the filing is and whether it was due to intentional disregard. Additionally, if you intentionally disregard the requirement to file Form 1099-NEC, the penalty can be increased to $1,100 per return. It’s important to file Form 1099-NEC accurately and on time to avoid these penalties.

Can I get an extension to file Form 1099-NEC?

Yes, you can request an extension to file Form 1099-NEC. The automatic extension of time to file certain information returns, including Form 1099-NEC, is 30 days. You can request this extension by creating and transmitting an electronic file or fill-in form on the FIRE webpage, or by submitting a paper Form 8809, Application for Extension of Time to File Information Returns. It’s important to note that the extension request must be filed by the due date of the returns in order to get the 30-day extension.

Can I correct errors on Form 1099-NEC?

Yes, you can correct errors on Form 1099-NEC if you have already sent it to the IRS. To correct a Form 1099-NEC that has been filed, you should follow the instructions provided by the IRS.

For paper forms, you can refer to Part H in the General Instructions for Certain Information Returns for the current year. It will provide guidance on how to make corrections on paper forms without checking the VOID box, as checking the VOID box will prevent the correction from being entered into IRS records.

Instructions for Forms 1099-MISC and 1099-NEC.