1099 reporting for 2024

As we near the end of 2024, business should consider the significant changes to the 1099 reporting requirements. Here is a comprehensive look at the 1099 reporting requirement, the key changes and what they mean for your business.

What is a 1099?

A 1099 form is used to report various types of income other than wages, salaries, and tips. The most common type for business owners is the 1099-NEC (Non-Employee Compensation), which is used to report payments made to independent contractors and freelancers. The purpose of the form is to report income paid to individuals who are not employees, such as independent contractors, freelancers, and other service providers.

Deadlines:

  1. January 31: Most 1099 reporting must be provided to the recipient by January 31.

  2. February 28: If filing by paper, the 1099 forms must be submitted to the IRS by February 28.

  3. March 31: If filing electronically, the deadline for submitting 1099 forms to the IRS is March 31.

Note that there is available a one-month extension and for certain circumstances an additional extension available.

Penalties:

Penalties for non-compliance can result in significant monetary penalties as they are assessed per form. Here’s a summary of the potential penalties:

Late filing penalties

  • Within 30 Days: $60 per form if filed within 30 days after the due date.

  • More than 30 Days Late but by August 1: $120 per form.

  • After August 1 or Not Filed: $310 per form.

Other penalties

If a business intentionally disregards the requirement to file a correct 1099 form, the penalty increases to $630 per form or 10% of the income reported on the form, whichever is greater. Similar penalties apply for failing to provide correct payee statements to recipients, with amounts mirroring those for late filing. If a business is required to file electronically but fails to do so, additional penalties may apply. Keep in mind that the IRS charges monthly interest on unpaid penalties until the full amount is paid.

List of 1099 forms:

The most commonly used 1099 forms include 1099-DIV, 1099-INT, 1099-K, 1099-MISC, 1099-NEC, and 1099-R. However here is a complete list of forms. These forms cover a wide range of income types and transactions, ensuring that various forms of income are reported to the IRS.

  1. 1099-A: Acquisition or Abandonment of Secured Property

  2. 1099-B: Proceeds from Broker and Barter Exchange Transactions

  3. 1099-C: Cancellation of Debt

  4. 1099-CAP: Changes in Corporate Control and Capital Structure

  5. 1099-DIV: Dividends and Distributions

  6. 1099-G: Certain Government Payments

  7. 1099-INT: Interest Income

  8. 1099-K: Payment Card and Third-Party Network Transactions

  9. 1099-LTC: Long-Term Care and Accelerated Death Benefits

  10. 1099-MISC: Miscellaneous Information

  11. 1099-NEC: Nonemployee Compensation

  12. 1099-OID: Original Issue Discount

  13. 1099-PATR: Taxable Distributions Received from Cooperatives

  14. 1099-Q: Payments from Qualified Education Programs

  15. 1099-R: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

  16. 1099-S: Proceeds from Real Estate Transactions

  17. 1099-SA: Distributions from an HSA, Archer MSA, or Medicare Advantage MSA

  18. 1099-SB: Seller’s Investment in Life Insurance Contract

Changes 2024:

Lower Reporting Thresholds

One of the most notable changes is the adjustment in reporting thresholds for Form 1099-K. Previously, businesses were required to issue a 1099-K if payments exceeded $20,000 and involved 200 or more transactions in a year. Starting in 2024, this threshold has been significantly reduced to $5,000. This change is expected to significantly increase the 1099 reporting compliance burden on companies.

Changes to form 1099-NEC and 1099-MISC

The thresholds for Form 1099-NEC (Non-Employee Compensation) and Form 1099-MISC have also been adjusted. The reporting threshold for these forms has increased from $600 to $1,000 for payments made on or after January 1, 2024. This change aims to reduce the number of forms businesses need to file, simplifying the process for smaller transactions.

New electronic filing requirement

The IRS has lowered the electronic filing threshold to 10 forms, calculated by aggregating all information returns. This means that businesses filing 10 or more 1099 forms must do so electronically. This change is part of a broader effort to modernize tax filing and improve efficiency.

Conclusion

As the 2024 1099 reporting deadline approaches, businesses should make sure to account for these changes by reviewing their current processes, training staff, and consulting with tax professionals to ensure compliance.

By adhering to the required 1099 changes, deadlines and maintaining accurate records, business owners can ensure compliance with IRS regulations and avoid potential penalties.

If you have any specific questions or require assistance with these requirements, feel free to reach us at:

+1 (305) 762-9587, chad.hagger@hagger-tax.com

or schedule a free consultation here - https://calendly.com/chad-hagger-hagger-tax/free-consultation

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Instructions for Forms 1099-MISC and 1099-NEC (01/2024)

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