1099 Reporting: Key Deadlines and Requirements for 2024
In this article:
- 1099 Reporting Requirements
- Payments Through Peer-to-peer Platforms
- Foreign Reporting Requirements
- FAQs
- Simplify Your Filings
1099 Reporting Requirements
AAFCPAs reminds clients that payments exceeding $600 made to non-employees, including contractors and other service providers, must be reported to the IRS using Forms 1099. If your business hired consultants in 2024, paid dividends, or managed a complex debt structure involving independent contractors, you may face penalties if 1099 forms are not submitted on time. Even if software or payroll providers handle these filings, additional forms may be necessary for payments like legal fees, rent, prizes, awards, or other 1099-eligible transactions.
Many businesses are unaware that specific payments require 1099 filings. AAFCPAs advises that clients perform a 1099 analysis in Q4 to ensure all W-9 forms are collected and filings are prepared in advance. Late or missing filings could result in audits and fines from the IRS.
Payments Through Peer-to-peer Platforms
Beginning in 2024, the IRS has lowered the reporting threshold to $5,000 for businesses receiving payments through peer-to-peer platforms like Venmo and Zelle as part of its phased approach. Note that peer-to-peer platforms are required to issue Form 1099-K to businesses receiving funds within this threshold for reporting purposes. The agency’s change in threshold is significant from the previous $20,000 and 200-transaction limit with the exception of Massachusetts, Vermont, Maryland, and Virginia’s $600 threshold along with Illinois’ $1,000 threshold if you had at least four separate business transactions. The new $5,000 threshold applies beginning with tax returns for 2024 due in 2025. With this change, companies need to monitor transactions more closely to ensure proper filing and avoid potential penalties associated with underreporting income from third-party sources.
Foreign Reporting Requirements
When working with foreign vendors, U.S. businesses must comply with specific tax reporting requirements including the collection of Form W-8. This form certifies the vendor’s foreign status, ensuring proper tax treatment of payments. Without a W-8 form, you may need to withhold U.S. taxes on payments to foreign vendors, so keeping proper documentation helps you avoid unnecessary withholding. Additionally, W-8 forms allow vendors to claim benefits under applicable tax treaties, which can reduce or eliminate U.S. withholding taxes on certain types of income. Companies may also have a filing requirement on Form 1042 when they make payments to foreign vendors. Forms 1042 are due by March 15. (For more information, please see question six in FAQs.)
FAQs
1. When are 1099s due?
| Form | Due to Recipient | Filed with IRS |
|---|---|---|
| 1099-NEC | 01/31/24 | 01/31/24 |
| 1099-MISC | 01/31/24 | 02/28/24 (Paper), 03/31/24 (Electronic) |
| 1099-DIV | 01/31/24 | 02/28/24 (Paper), 03/31/24 (Electronic) |
| 1099-INT | 01/31/24 | 02/28/24 (Paper), 03/31/24 (Electronic) |
2. My company does not hire contractors. Am I still required to send 1099s?
If you paid rent or worked with a professional service provider or consultant, you will likely have a 1099 filing requirement.
3. What information will I need to file 1099s?
To file 1099s, you will need to know the recipient’s name, address, and Taxpayer Identification Number (TIN). This information must match the W-9 collected from the vendor and the information reported on their tax return. In most cases, you will also need to report on the 1099 total cash payments made to the recipient.
4. Do LLCs receive 1099s?
This depends. If an LLC files taxes as an S or C corporation, it does not receive 1099s. If an LLC files as a partnership, it does. Payments made to corporations do not need to be reported with the exception of legal services. You must report attorneys’ fees or gross proceeds to corporations that provide legal services as well as payments to medical and health care providers. This includes payments to doctors, nurses, hospitals, and other medical service providers.
5. What are the various types of 1099s?
There are more than 20 different 1099 forms. The most common include:
- 1099-NEC. This form is used to report non-employment compensation (NEC), i.e., payments for services performed for a trade or business by vendors that are not treated as employees, such as consultants, lawyers, and contractors. The 1099-NEC includes 12 boxes for various types of payments.
- 1099-MISC. The most common payments reported on this form include rent (Box 1), royalties (Box 2), and gross proceeds paid to an attorney related to a lawsuit (Box 10).
- 1099-DIV. This form is used to report dividends paid during the fiscal year.
- 1099-INT. This form is used to report interest paid by an organization or converted to principal.
6. What are the various types of W-8s?
There are a number of W-8 forms that apply to different situations. Each form is used to reduce or avoid U.S. withholding on income like interest, dividends, or royalties. Understanding these foreign reporting requirements is vital for maintaining compliance and avoiding unnecessary tax liabilities.
These include:
- W-8BEN. For individuals certifying foreign status and claiming treaty benefits.
- W-8BEN-E. For entities, such as corporations or partnerships, to certify foreign status and claim tax treaty benefits.
- W-8ECI. For foreign entities earning income effectively connected to a U.S. trade or business.
- W-8EXP. For foreign governments and international organizations.
- W-8IMY. For intermediaries or flow-through entities.
7. What if payments were made through Venmo, PayPal, a payment app, or by credit card?
Payments made through Venmo, PayPal, credit card, or debit card do not require a 1099 filing by the payor. Instead, the IRS requires that payment settlement entities like Venmo report transaction information by issuing Form 1099-K. Vendors paid through their payment settlement platform should receive a 1099-K directly from the payment processor.
Simplify Your Filings
Analysis, mailing, and filing of Forms 1099 and W-8 occur at a time when most organizations are closing books, handling year-end, and enjoying holidays. Companies that might already be short staffed may find tax reporting and 1099 requirements especially challenging. AAFCPAs can conduct a comprehensive 1099 analyses to determine our clients’ filing needs. When filings are required, we can also process, mail, and file 1099s and W-8s on your behalf to ensure accuracy, efficiency, and data security.
If you have questions, please contact Terri Delaney, Consulting CFO at 774.512.9035 or tdelaney@nullaafcpa.com, Destiny J. Flood, CPA, Partner, Commercial Outsourced Accounting & Fractional CFO at 774.512.4151 or dflood@nullaafcpa.com, Nicholas M. Foresti, MBA, Consulting Controller at 774.512.4017 or nforesti@nullaafcpa.com, Ashleigh Marks, CPA, Consulting CFO at 774.512.4136 or amarks@nullaafcpa.com—or your AAFCPAs Partner.
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