Who receives a 1099-NEC or 1099-MISC

When hiring a vendor or independent contractor, within the agreement package should be a completed W9. The W9 will be used to determine if a 1099 will need to be filed by the end of January. The information on the W9 will be used to file a 1099-NEC or 1099-MISC. The 1099-NEC and 1099-MISC filing deadline is January 31st. For the 2021 tax year, there were three different types of 1099s (1099-NEC, 1099-MISC, and 1099-K floating around that caused a bit of confusion on which to file. We will cover 1099-NEC, 1099-MISC, 1099K that impacts small businesses.

Difference Between 1099-NEC, 1099-MISC, 1099-K And Who Receives Them:

1099-NEC

- Issued to independent contractors, freelancers, side gigs paid more than $600 within the year. Examples:
  - - Bookkeepers, accountants
  - - Lawyers
  - - IT, web designers, programmers
  - - Online freelancers

1099-MISC

- Report payments of $10 or more made in the course of a trade or business in gross royalties or payments of $600 or more made in the course of a trade or business in rents or for other specified purposes (IRS.gov). Example: Office Rent/Lease payments

Who Does Not Receive A 1099-NEC Or 1099-MISC

- Incorporated businesses such as S Corporations and C Corporations do not receive a 1099-NEC or 1099-MISC.

- Vendors and independent contractors paid through third party networks like credit cards, Square, and PayPal. They will receive a 1099-K (Payment Card and Third Party Network Transactions) if paid over $600 within the year.

- Foreign contractors that performed work outside of the US do not receive a 1099-NEC or 1099-MISC. It is best to have the foreign contractor complete a Form W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting. This certifies that the foreign contractor is not a U.S. taxpayer.

Nicole Wright is a seasoned financial expert dedicated to empowering small businesses. As the driving force behind Wright Accounting Solutions, she is committed to providing exceptional accounting, bookkeeping, and strategic CFO services. With a keen understanding of the challenges faced by small business owners, Nicole and her team offer tailored solutions to help businesses thrive. Their focus on building strong client relationships and delivering outstanding customer service has solidified Wright Accounting Solutions as a trusted partner for government agencies and small service-based businesses across various industries.