Important Update: 1099 Reporting for 2023

It’s that wonderful time of year again to tell the IRS who and what you paid to non-incorporated businesses! You collected all your vendors W9s, right?

If you paid someone more than $600 in 2023, you may have to file a 1099 for them by Jan 31st, 2024. Have to file 10 or more? Then you must file electronically.

Need help?
Luckily you know the very capable team at Snap Advisory that can handle it for you.

Want to tackle it yourself?
Here’s all the info you need:

Businesses are required to report certain payments made to unincorporated service providers or vendors by issuing them an information return known as a 1099.

There are two main types of 1099’s to be aware of:

• Form 1099-NEC: Used to report non-employee compensation of $600 or more. Common examples are payments to independent contractors for services.
  
• Form 1099-MISC: Used to report miscellaneous income of $600 or more that doesn't fit under another type of 1099. Examples are rent payments or awards/prizes issued. 
  

It's important to note that if a vendor incorporated their business instead of operating as a sole proprietorship or partnership, payments to them may not require a 1099.

The due date for mailing out all 1099s to recipients is January 31, 2024 for the 2023 tax year. By this date, you must also submit copies of the forms to the IRS. Please be sure to keep copies for your own records as well.

Don’t forget to also have all new vendors and contractors complete IRS Form W-9 before making any payments to them during the year. Having current W-9s that include full taxpayer identification numbers and correct business names is crucial for accurate matching when you issue 1099s. If you do not collect valid W-9 information ahead of time, it is fairly common for the IRS to forcefully impose backup withholding requirements until you are able to properly identify the payee in your reporting. Avoid headaches down the road by always gathering W-9s early on.

Lastly, businesses with more than 10 Form 1099-NEC, 1099-MISC, or W-2’s for 2023 will need to transmit them electronically when reporting in early 2024. This means that paper filing is still allowed for 9 or fewer returns.

Properly tracking and reporting 1099s is important for both staying compliant and helping your contractors handle their own tax obligations. 

Best,

Saad Abbas, CPA
Snap Advisory Inc