Stay up-to-date on the latest firm, tax, and regulatory updates by joining our newsletter!
Outsourced Accounting Services Group | Boeckermann Grafstrom & Mayer
As 2020 nears a close, now is the time to put yourself and your business in good shape for 2021. This blog discusses 1099-MISC and 1099-NEC and other expenses and itemizations to review with your professional tax advisor during the final weeks of December.
Are you paying vendors that require a 1099-MISC? In 2020 the IRS added a new form called 1099-NEC and most of your vendors that received a 1099-MISC in past years will likely now need to receive a 1099-NEC. It’s important to remember that the 1099-NEC is not a replacement form for the 1099-MISC, but it is replacing it only for the purpose of reporting independent contractor payments.
You should include payments to individuals that do not receive a W-2. This includes individuals, Limited Liability Company (LLC), and partnerships. And only if the payment is $600 or more. In general, you don’t have to send payments to C Corporations and S Corporations. The best way to determine this classification is to have all your vendors complete a W-9 before payment is distributed. It is best to have your vendors complete their W-9 in January of each year. A W-9 can be found online or Boeckermann Grafstrom & Mayer (BGM) will provide one to you.
Examples of reportable payments include, but are not limited to:
The 1099-NEC is not replacing the 1099-MISC because the 1099-NEC is for non-employee payments only. You should still use the 1099-MISC for all other types of payments. You may notice that the form has a new design and some of the box numbers and formatting have changed.
Examples of payments that you might use the 1099-MISC include, but are not limited to:
It is important to file 1099s each year and to submit them by the last day of January. The IRS does impose penalties if they are not filed on time.
When you are looking through your numbers, it is recommended that you separate the various expenses. You may find it helpful to discuss this with your tax professional, in order to receive maximum benefit. These items include:
There are many annual and year-end benefits that BGM’s Outsourced Accounting Services can help you with, including referring you to a tax professional that could possibly reduce some of your tax liability. If you have any questions or would like to learn more, please reach out to Cory Parnell, Principal, at [email protected] or fill out the Contact Us form.
Please SUBSCRIBE to our newsletter and you’ll receive practical, actionable updates on a regular basis.