Notice to Herbein Clients – 2021 Federal Form 1099 Reporting
General Form 1099 Reporting Requirements
Your business may have tax information reporting obligations for various types of payments made in the ordinary course of your business during the year. These can include interest, dividend and rent payments. However, for small businesses these most often include payments for services made to nonemployees or independent contractors during the ordinary course of your business. You are required to report these payments on the IRS Forms 1099-INT, 1099-DIV, 1099-MISC & 1099NEC.
When to use Form 1099-MISC – due February 28th if paper filed or March 31 if filed electronically
Please note, the Form 1099-MISC (Miscellaneous Income) should be used for payments to individuals, estates, limited liability companies, partnerships, and attorneys regardless of filing status for:
- $10 or more in royalties or broker payments in lieu of dividends or tax-exempt interest.
- $600 or more in rents, prizes, other income payment, medical and health care payments, and payments to an attorney.
- $5,000 or more in sales of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
- Any person for which you withhold federal income taxes.
When to use Form 1099-NEC – due January 31st regardless of paper or electronic
A 1099-NEC is used to report non-employee compensation (items previously reported in Box 7 of the Form 1099-MISC) if you paid more than $600 for services to individuals, estates, limited liability companies, partnerships, and attorneys regardless of filing status.
It is important to note that these two 1099 Forms have different due dates - the 1099-NEC must be filed with the IRS by January 31st and the due date for Form 1099-MISC (also Form 1099-INT & 1099-DIV) is February 28 if paper filed and March 31st if filed electronically. However, both the 1099-NEC and 1099-MISC need to be provided to the recipient by January 31st.
To avoid a penalty that can be imposed for failure to file a timely informational return with the IRS, the original forms must be furnished to recipients and filed with the IRS by the required due date.
Special notice for those currently using our firm to prepare your 1099 Forms who made payments to Tubiello-Harr & Associates, LLC (THALLC)
If you would like us to prepare these filings, please provide the necessary information to us as soon as possible. We have prepared an Excel template to assist you in gathering information. The excel template is located here.
If we do not receive your 1099 information, we will assume you are preparing your own 1099s for 2021.
Special considerations for payments to THALLC rather than payments to Herbein + Company, Inc.
As a of the result of the acquisition of THALLC by Herbein + Company, Inc. during 2021, the following additional instructions are needed to differentiate the reporting of your payments to THALLC from your payments to Herbein + Company, Inc.
Please also note that a Form 1099 is necessary if total 2021 payments to Tubiello-Harr & Associates, LLC (THALLC) exceed $600 and this information needs to be included on the Excel template or the Form 1099 payment information you provide to us. Since Herbein + Company, Inc. is an S Corporation rather than an LLC, there is no requirement to issue a Form 1099 to Herbein + Company. Therefore, please do not include the payments made to Herbein + Company on the Tubiello-Harr & Associates, LLC 1099.
Also, due to timing of when payments are made and received, plus differences in who made the payment (you personally versus your Company), your records may not agree to ours. 1099 filings are based upon payment dates. If you do not include all your payments to THALLC on the Excel template or the information you provide to us, we will incur additional time to determine the correct amount to report on the Form 1099 and will need to charge for the additional time.
In addition, please note that:
- Unless specifically requested by you by email or in other written communication, we will not be reviewing your QuickBooks file for potential 1099 required filings. Any review and analysis you request us to perform will be billed at the standard hourly rate of the staff assigned. Because we are unfamiliar with all vendors, we cannot guarantee that all potential vendors will be identified.
- To ensure that the information provided to us is accurate, please ensure that you have completed all reconciliations for the month of December prior to sending your 1099 information to us.
Fee Schedule for Preparation of Form 1099s
Preparation of the Form 1099 will be at our normal rates based on time required to complete the project.
Final Notes Regarding Form 1099 Reporting
Also consider PA Form 1099 reporting requirements
While this tax blog addressed federal Form 1099 reporting requirements, it is important to also consider and be aware of certain PA 1099 reporting requirements that were addressed in this prior tax blog article PA 1099 Requirements.
You are ultimately responsible for complying with IRS, PA and other states information reporting requirements and the filing Form1099s.
Our hope is that by providing the information and instructions in these 1099 reporting tax blog articles we can help you navigate these reporting requirements while minimizing cost of compliance by avoiding unnecessary time spent in the preparation of your 1099s. If you wish to further reduce your compliance cost and want to prepare and file your own 1099s, we can assist with that as well. If you have any questions, please feel free to contact your Herbein team member.
We have prepared an Excel template to assist you in gathering information. The excel template is located here.