Important: 2023 Federal Form 1099 reporting

General Form 1099 reporting requirements

Certain types of payments your business made during the year may require tax information reporting. These can include interest, dividend and rent payments and, 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 & 1099-NEC. Payments by businesses to non-incorporated entities for services are reported on Form 1099-MISC and 1099-NEC. 

New electronic filing requirements for 2023

If you file a combined 10 or more information returns (which include 1099s and W-2s), you are required to file them electronically. Previously, the required number for electronic filing was 200 or more. See Herbein’s New Filing Requirements for W-2s and 1099s article here.

When to use Form 1099-MISC

The Form 1099-MISC (Miscellaneous Income) is used for payments to individuals, estates, limited liability companies (unless treated as a C or S corporation), partnerships, and attorneys regardless of filing status if one of the following payments was made during the year:

• At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
• $600 or more in rents, prizes and awards, other income payment, medical and health care payments, and gross proceeds paid to an attorney.
• Direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
• Any person for which you withhold federal income taxes.

If a payment was made to a corporation (including a limited liability company that is treated as a C or S corporation), a Form 1099-NEC is not required. Obtaining a W-9 for each vendor to which a payment was made during the year will assist you in making this determination.

The 1099-MISC is due to the recipients by January 31, 2024, and is due to the IRS by April 1, 2024 (February 28, 2024 if you are under the 10 and are paper filing) 

When to use Form 1099-NEC

• Services performed as a nonemployee, i.e., nonemployee compensation
• Other forms of compensation for services performed for your trade of business by an individual who is not your employee
• Payments to an attorney (including corporations)

The 1099-NEC is due to the recipient and the IRS by January 31, 2024.

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. 

Using our firm to prepare your 1099 Forms 

If you would like us to prepare the necessary filings, please provide the necessary information to us by January 17, 2024. We have prepared an Excel template to assist you in gathering information. The Excel template is located here. 

If we do not receive your information by that date, we will assume you are preparing your own 1099s for 2023.

• 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 hourly rates times actual time to complete.

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. The current PA tax information rules, including additional requirements for electronic filing of returns, is located on the PA Department of Revenue website at W-2/1099 Reporting Instructions. More information can be found in the Herbein article here. 

You are ultimately responsible for complying with IRS and PA information reporting requirements.

Please note: You are ultimately responsible for meeting the IRS and PA requirements for filing 1099s. By providing the information and instructions in these 1099 reporting tax blog articles, our objective is to assist you in navigating 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 would be happy to assist with that as well. If you have any questions, please feel free to contact your Herbein team member.

Article Contributed by Michelle Sowers