FAQs on Form 1099

Q1. What is a form 1099?

Ans. Form 1099 is a tax form used by businesses to report payments made to non-employees, such as independent contractors and other service providers, to the Internal Revenue Service (IRS). There are various types of 1099 forms, each used to report different types of payments.

Q2. What are the different types of 1099 forms?

Ans. Some common types of 1099 forms are:

1099-MISC	For miscellaneous payments such as rent and royalties.
1099-NEC	For non-employee compensation, typically used for reporting payments made to independent contractors.
1099-INT	For interest payments, typically reported by banks.
1099-DIV	For dividend payments and distributions from investments.
1099-B	For proceeds from broker, including sale of stocks, commodities and other securities.
1099-K	For payments from credit card or payment card transactions and third-party network transactions.
1099-S	For proceeds from real estate transactions.

Q3. Is there any threshold limit to issue 1099?

Ans. Yes, you must issue 1099 form if you meet the following thresholds:

· 1099-MISC: If you have made payments of at least $10 in royalties or at least $600 in rent or other payments in a calendar year.

· 1099-NEC: If you have made payments of at least $600 for non-employment compensation to an independent contractor in a calendar year.

Q4. Are there any exceptions to issue 1099s?

Ans. Yes, you do not need to issue 1099s for payments made to

· Corporations (including a limited liability company (LLC) that is treated as C or S corporation). However, exemption from reporting payments made to corporations does not apply to payments for legal services.

· Payments made with a credit card or payment card, including third party network transactions, must be reported on Form 1099-K by the payments settlement entity and therefore not subject to 1099-MISC or 1099-NEC.

Q5. Do I need to file 1099 forms for payments made to employees?

Ans. No, payments made to employees are reported on Form W-2, not Form 1099.

Q6. What are the pre-requisites for issuing 1099s?

Ans. Following are the pre-requisites:

· Obtain taxpayer information: Gather the recipient’s name, address & Tax Identification Number (TIN). For individuals, this is usually a Social Security Number (SSN) and for businesses, it’s an Employer Identification Number (EIN).

· Determine amount to be reported in 1099: Calculate the amount to be reported on Form 1099, exclude any payments made via credit cards.

· Use the correct 1099 Form type: Ensure you are using the correct type of 1099 form for the specific type of payments being reported, such as 1099-MISC for miscellaneous payments, 1099-NEC for non-employee compensation, etc.

· Submit Forms: File the 1099 forms with the IRS and send a copy to the recipients. You may also need to file with your state tax department, depending on local requirements.

Q7. When are 1099s due?

Ans. All 1099 forms must be furnished to recipients by January 31. All 1099 forms are due to the IRS by Feb 28 (if filed by paper) and by March 31 (if e-filed), except for the 1099-NEC, which is due to the IRS by January 31.

Q8. What happens if I fail or furnish to file 1099 forms?

Ans. Failure to file or furnish 1099 forms on time can result in penalties and fines from the IRS.

Q9. Can I get an extension for the filing of 1099 form?

Ans. Yes, if you need additional time to file your 1099 forms, you can request an extension through Form 8809. Request the extension before the original due date to avoid any late filing penalties.

Q10. What if I made a mistake on a 1099 form?

Ans. If you made a mistake on your 1099 form, you can file the corrected form with the IRS in the same way the original was filed. If the original was e-filed, the correction should also be e-filed.

Q11. Is e-filing mandatory for 1099s?

Ans. Yes, starting from the year 2023, e-filing is mandatory for businesses that file 10 or more informational returns, including Forms 1099 & W2. However, businesses filing fewer than 10 returns can still opt for e-filing.