What Do I Need To Know About 1099-NECs?
10/05/22 • 16 min
With January fast approaching, it’s important for business owners to start preparing their 1099-NECs. If you want to stay ahead and get everything in order before the deadline, this episode is for you! We discuss whether or not a transaction needs a 1099, what the process for filing is, and what will happen if you missed filing a 1099.
[01:07] Fast Facts About 1099-NECs
- If your business pays a subcontractor or vendor, whether it’s an individual or a company, a total of $600+, you need to request a W9 so you can send them a 1099-NEC
- If you received a 1099-NEC as a contractor, you must report this income to the IRS
- Be it one-time or accumulative, as long as the total payment is over $600, you need to file a 1099-NEC
[04:05] When It Is NOT Required to File 1099-NECs
- Payments to C or S Corporations
- Employees
- Payments for merchandise, telephone, freight, or storage
- Payments to non-U.S. citizens performing work outside of the U.S
- Payments made via Credit Card or PayPal
[06:25] 1099-NEC Preparation Made Easy
- Step 1 – Collect a W9 from all contractors before you pay
- Step 2 – Fill out the 1099-NEC
- Step 3 – Send a copy of the 1099-NEC form to the contractor
- Step 4 – File a copy of the 1099-NEC with the IRS and State (if required)
- For contractors who are non-U.S. citizens - get an accomplished W8-BEN or W8-BEN-E instead
[08:54] Penalties for Failing to File a 1099-NEC
- 1099-NECs must be filed at the IRS and sent to the recipient by January 31st of the following year
- The fine will depend on how late you are
[10:16] Different Types of 1099s
- There are over 15 types of 1099 forms that are used for various purposes
[12:30] Final Thoughts
- Do that legwork now so you can get on top of the forms needed
- Utilize software to make processing and filing easier
Key Quotes
“If you are the one paying the contractor, you are the one that files the 1099-NEC.” - Mike Jesowshek
“Sometimes it's hard to get a W9 from someone after the fact so just ask for it upfront. Again, one rule of thumb before you pay anyone, collect a W9 from them.” - Mike Jesowshek
Resources Mentioned
- Blog Post: https://www.taxsavingspodcast.com/blog/what-do-i-need-to-know-about-1099s-for-business-owners
- Software: https://www.track1099.com/
- Downloads:
--------
Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast
Join Our Tax Minimization Program: https://www.taxsavingspodcast.com/tax
IncSight Packages: https://incsight.net/pricing/
Book an Initial Consultation: https://app.simplymeet.me/o/incsight/sale
-------
Podcast Website: https://www.TaxSavingsPodcast.com
Facebook Group: https://www.facebook.com/groups/taxsavings/
--------
To find out more on this topic and many others visit our website at www.TaxSavingsPodcast.com. You can also give us a
With January fast approaching, it’s important for business owners to start preparing their 1099-NECs. If you want to stay ahead and get everything in order before the deadline, this episode is for you! We discuss whether or not a transaction needs a 1099, what the process for filing is, and what will happen if you missed filing a 1099.
[01:07] Fast Facts About 1099-NECs
- If your business pays a subcontractor or vendor, whether it’s an individual or a company, a total of $600+, you need to request a W9 so you can send them a 1099-NEC
- If you received a 1099-NEC as a contractor, you must report this income to the IRS
- Be it one-time or accumulative, as long as the total payment is over $600, you need to file a 1099-NEC
[04:05] When It Is NOT Required to File 1099-NECs
- Payments to C or S Corporations
- Employees
- Payments for merchandise, telephone, freight, or storage
- Payments to non-U.S. citizens performing work outside of the U.S
- Payments made via Credit Card or PayPal
[06:25] 1099-NEC Preparation Made Easy
- Step 1 – Collect a W9 from all contractors before you pay
- Step 2 – Fill out the 1099-NEC
- Step 3 – Send a copy of the 1099-NEC form to the contractor
- Step 4 – File a copy of the 1099-NEC with the IRS and State (if required)
- For contractors who are non-U.S. citizens - get an accomplished W8-BEN or W8-BEN-E instead
[08:54] Penalties for Failing to File a 1099-NEC
- 1099-NECs must be filed at the IRS and sent to the recipient by January 31st of the following year
- The fine will depend on how late you are
[10:16] Different Types of 1099s
- There are over 15 types of 1099 forms that are used for various purposes
[12:30] Final Thoughts
- Do that legwork now so you can get on top of the forms needed
- Utilize software to make processing and filing easier
Key Quotes
“If you are the one paying the contractor, you are the one that files the 1099-NEC.” - Mike Jesowshek
“Sometimes it's hard to get a W9 from someone after the fact so just ask for it upfront. Again, one rule of thumb before you pay anyone, collect a W9 from them.” - Mike Jesowshek
Resources Mentioned
- Blog Post: https://www.taxsavingspodcast.com/blog/what-do-i-need-to-know-about-1099s-for-business-owners
- Software: https://www.track1099.com/
- Downloads:
--------
Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast
Join Our Tax Minimization Program: https://www.taxsavingspodcast.com/tax
IncSight Packages: https://incsight.net/pricing/
Book an Initial Consultation: https://app.simplymeet.me/o/incsight/sale
-------
Podcast Website: https://www.TaxSavingsPodcast.com
Facebook Group: https://www.facebook.com/groups/taxsavings/
--------
To find out more on this topic and many others visit our website at www.TaxSavingsPodcast.com. You can also give us a
Previous Episode
How Does the Home Office Deduction Work?
The home office deduction is a tax deduction almost anyone can take advantage of, especially post-COVID’s work-from-home movement. There's a lot of confusion among business owners thinking that the home office deduction is an IRS red flag, but in this episode, we set the record straight. We talk about this deduction, who can qualify for it, and everything you need to know.
[01:02] What Qualifies As A Home Office?
- The home office deduction is not a red flag, as long as you're doing it properly
- A home office is used exclusively for business and on a regular basis
- It is a principal place of business that is used to meet clients or is used to do administrative or management work
[04:34] How To Calculate the Home Office Deduction
- The simplified option: Standard deduction of $5 per square foot of home used for business (maximum 300 square feet)
- The actual method: Your BUP multiplied by all the expenses associated with that home
[09:17] Where Do You Claim The Home Office Deduction?
- Claiming the deduction will depend on how your business is set up
- Check out our blog on the Accountable Plan and why it’s important
[10:40] Final Thoughts on How the Home Office Deduction Works
- It’s not an audit risk if you do it properly
- To help prove your deduction, keep a log and take photos to record the business use of that home office
- Bonus tip: A home office increases the amount of business mileage you can take
Key Quotes
“The home office deduction is not a red flag as long as you're doing it properly. Actually, the home office deduction is something that the majority of business owners should take advantage of.” – Mike Jesowshek
“A home office deduction is not an audit risk as long as you're doing it right. Just don't get greedy. Make sure you document the necessary items to support your deduction.” – Mike Jesowshek
Resources Mentioned
- Blog Mentioned - Accountable Plan Importance (Expense Reimbursement): https://www.taxsavingspodcast.com/blog/what-is-an-accountable-plan-and-why-is-it-important-to-my-business
- Article: https://www.taxsavingspodcast.com/blog/how-does-the-home-office-deduction-work
- Join Our Tax Minimization Program: https://www.taxsavingspodcast.com/tax
--------
Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast
Join Our Tax Minimization Program: https://www.taxsavingspodcast.com/tax
IncSight Packages: https://incsight.net/pricing/
Book an Initial Consultation: https://app.simplymeet.me/o/incsight/sale
-------
Podcast Website: https://www.TaxSavingsPodcast.com
Facebook Group: https://www.facebook.com/groups/taxsavings/
--------
To find out more on this topic and many others visit our website at www.TaxSavingsPodcast.com. You can also give us a call at 844-327-9272 or send your questions to us at: [email protected]
Next Episode
What Do I Need to Maintain My Corporate Entity?
On this episode Mike Jesowshek, CPA talks with Attorney Andrew M Ayers about things you need to have in place to maintain your corporate entity.
1) Your Corporate Binder
2) Why Do I Need to Keep Corporate Records?
3) Do I Need to File My Corporate Records with the State?
LINKS FROM THE SHOW
Show Blog: https://www.taxsavingspodcast.com/blog/what-do-i-need-to-maintain-my-corporate-entity
Join Our Tax Minimization Program: https://www.taxsavingspodcast.com/tax
--------
Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast
Article: https://www.taxsavingspodcast.com/blog/what-do-i-need-to-maintain-my-corporate-entity
Join Our Tax Minimization Program: https://www.taxsavingspodcast.com/tax
IncSight Packages: https://incsight.net/pricing/
Book an Initial Consultation: https://app.simplymeet.me/o/incsight/sale
-------
Podcast Website: https://www.TaxSavingsPodcast.com
Facebook Group: https://www.facebook.com/groups/taxsavings/
--------
To find out more on this topic and many others visit our website at www.TaxSavingsPodcast.com. You can also give us a call at 844-327-9272 or send your questions to us at: [email protected]
If you like this episode you’ll love
Episode Comments
Generate a badge
Get a badge for your website that links back to this episode
<a href="https://goodpods.com/podcasts/small-business-tax-savings-podcast-69206/what-do-i-need-to-know-about-1099-necs-24115019"> <img src="https://storage.googleapis.com/goodpods-images-bucket/badges/generic-badge-1.svg" alt="listen to what do i need to know about 1099-necs? on goodpods" style="width: 225px" /> </a>
Copy