Form 1099: What Is It and Do You Need to Send One?
It’s W-2 and 1099 filing season, so you’re probably starting to hear all about what you “need” to do… and it can be confusing. If you heard of a Form 1099-NEC and you’re thinking, “1099? What is it and do I really need to send one?” Then you’ve come to the perfect place!
You’re a business owner who has a lot on your plate already. From running the administrative side of your business, to marketing, to actually selling and fulfilling your product or services, you’re juggling a lot.
Not to mention the mom side of things. CEO moms seriously have super powers!
And now you have the tax and financial side of your business to deal with. It can be overwhelming (I know, because we hear this all the time from our clients). In addition to figuring out which one of the bazillion IRS forms applies to you, now you have to figure out if you’re required to file it.
We’ve got your back – because we’re passionate about empowering our clients with education. Read on to learn why tax education is so important for CEO moms, what a Form 1099-NEC is, if you need to send one, and your next steps.
Why Learn About Taxes and Finances?
I get it: You didn’t go to school to be a tax professional or accountant. Maybe you hate talking about money and want nothing to do with that side of your business. If you’re thinking “That’s why I hired a CPA – so I wouldn’t have to deal with it,” then I hear you.
But hear me out: You need to know your numbers. You don’t need to know tax code inside and out like we do, and you don’t need to know how to fill out tax forms yourself. But you do need to have a basic grasp on your numbers and how your business taxes work, so you can make educated financial decisions about your business.
At the Tara CPA Firm, we take time to educate you on taxes and money – because knowledge is power.
We create an open space for questions – no judgment – to make sure you understand the “why” behind your customized tax strategy.
The end result? You always learn something after a call, feel like you have a true partner in your business, and can make decisions that build wealth for years to come in your business.
That being said, here’s what you need to know about Form 1099-NEC:
Form 1099: What Is It?
Form 1099 is a tax form used the document payments made by an individual or business that usually isn’t their employer. The business or individual that pays the money fills out the form and sends the copy to the person they paid, and to the IRS. The form reports the payments made during the tax year.
What is a Form 1099-NEC?
There are different 1099 forms that report different types of income and how they were earned. In this post, we’re talking about a Form 1099-NEC. A Form 1099-NEC is used to report non-employee compensation of $600 or more, or whenever they withhold federal income taxes.
Do You Need to Send a Form 1099-NEC?
You’ve probably heard of Form 1099-NEC, but you don’t know if you’re required to file them with the IRS or not. If you are a business owner (or self-employed in any way), you are required to submit these informational returns to the IRS if you made any of the following types of payments:
To a person who is not an employee that you have paid at least $600 in the calendar year for services
To a person that you withheld taxes for under the backup withholding rules
This means that if you paid someone via a credit card processor or other third party merchant, such as Venmo or Paypal, you do NOT need to issue that person a Form-1099 NEC.
Obtain a Form W-9
The most critical step (that is often overlooked) is obtaining a Form W-9 from the service provider. Form W-9 provides you with all of the information you’ll need to issue the Form 1099-NEC (and if you’re even required to do so).
When Is the Form 1099-NEC Due?
The deadline for filing these forms with the government & mailing them out to recipients is January 31, 2025.
If you use a payroll processing software like Gusto (which is our Firm’s recommendation), they will take care of all of this for you!
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Disclaimer: This article is not meant to be tax advice. This is not an all-inclusive list of business advice. Different rules may apply to each individual taxpayer’s specific situation. Please consult with your accountant. May contain affiliate links.
