How do I do 1099s?

Written by

Jag Brar

Year-end means 1099s for the payments you made to independent contractors. Form 1099-NEC is due to the IRS and contractors by January 31, 2022.

What are my 1099 obligations?

The IRS has clear guidelines on who is an independent contractor. Any contractor who was paid more than $600 in non-employee compensation during the 2021 calendar year should receive a Form 1099-NEC.

Corporations and tax-exempt recipients (confirm their status on their W-9) do not receive one.
Report the gross amount paid, not the net amount.

Copy A of the form must go to the IRS, Copy B goes to the contractor.

Some types of miscellaneous expenses call for a 1099-MISC instead of a 1099-NEC, including:

Rent greater than $600.
Royalties greater than $10.
Prizes greater than $600.
Medical payments greater than $600.
Proceeds paid to an attorney in connection with legal services (but attorney services greater than $600 require a 1099-NEC. More information is here.)

Form 1099-MISC is due to contractors by January 31, 2022 (or February 15, 2022, if amounts are reported in Box 8 or 10), but is not due to the IRS until March 31, 2022, if you file electronically, and February 28, 2022, if you file by paper.

Extensions for filing are only granted in catastrophic circumstances. Penalties can be costly.

How can 1099s be easier?

Collect W-9s from all vendors as a normal part of the vendor onboarding process. A W-9 has the information you need to complete 1099s — legal status (LLC, Corp, independent contractor, etc.), name, address, and EIN/SSN.

In a well-designed bill payment system like Airbase, the system will request a W-9 from the vendor, and receipt of it can even be set as a condition for payment. In January, run a report to see who was paid more than $600, and to check that the system has the info you need to complete the 1099s, or send the report to your preparer.

Is there any way I can get out of submitting 1099s?

When vendors are paid by credit card, the 1099 burden shifts to the payment processing company who will send Form 1099-K. Their reporting requirements are different (depending on the state) but the responsibility is theirs. With Airbase, it’s easy to select payment by card instead of by check, ACH, or wire, and in so doing remove an obligation to report the payment.

Read our blog on 1099 processes for more information, and register for the upcoming webinar, Year-end tax planning, including the joys of 1099 prep!

Jag Brar

About Airbase

Airbase offers a one platform solution to manage all non-payroll spend. It provides oversight and control over spending with real-time reporting and automatic syncing directly to your general ledger. Control all payments – physical cards, virtual cards, ACH, and checks – from one place. Close faster. Empower employees. Control spend.

To learn more about Airbase, contact us for a product demo.

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