1099-Misc: Nonemployee Compensation Best Practices

By Tabetha Albrecht, CPA

1099 Miscellaneous (1099-Misc) forms need to be filed for a multitude of reasons. The 1099-Misc we most commonly file for clients is for rents paid (box 1) and nonemployee compensation (box 7). Nonemployee compensation is services performed for your business by someone that is not an employee. Such services include attorney fees, advertising, consulting, independent contractors, and contract labor, just to name a few.

If you have paid at least $600 to one vendor for any of the above listed items, you have met the 1099-Misc threshold and must file the form with the Internal Revenue Service(IRS). If you have withheld any federal income tax from a vendor, you must file the 1099-Misc with the government even if the total paid to the vendor is less than $600. 1099s must be electronically filed with the Iowa Department of Revenue if there is any Iowa income tax withheld from the earnings.

1099-Misc reporting nonemployee compensation must be filed on or before January 31, 2020 with the IRS to avoid late penalties. All other reported payments on the 1099-Misc must be filed by February 28, 2020 if paper filing or by March 31, 2020 if electronically filing If any of your 1099-Misc reporting nonemployee compensation will be filed after the January 31st deadline, you must file them in a separate transmission from all other amounts on the 1099-Misc to reduce late penalties. The deadline to file 1099s with the Iowa Department of Revenue is February 15, 2020.

Here are a few best practices that can be applied now to help make your year-end filings easier:

  1. 1) Create a list of vendors that you will meet the $600 threshold for the year and will need a 1099 issued to them
  2. 2) From that list, make sure you have a W-9 on file for each vendor. The W-9 form can be found here: https://www.irs.gov/pub/irs-pdf/fw9.pdf)
  3. 3) If you do not have W-9s on file, make sure you request them from the vendors
  4. 4) If you are using QuickBooks, make sure the W-9 information is in the system and the vendor is marked as a 1099 vendor

The IRS 1099 instructions can be found here: https://www.irs.gov/pub/irs-pdf/i1099msc.pdf.

If you need help processing 1099s at year-end or if you would like our assistance in implementing a process to make your year-end filings easier, please let us know.

Tabetha Albrecht, CPA | Manager
TAlbrecht@MHCScpa.com