Updated: Jun 18
When hiring a vendor or independent contractor, within the agreement package should be a completed W9. The W9 will be used to determine if a 1099 will need to be filed by the end of January. The information on the W9 will be used to file a 1099-NEC or 1099-MISC. The 1099-NEC and 1099-MISC filing deadline is January 31st. For the 2021 tax year, there were three different types of 1099s (1099-NEC, 1099-MISC, and 1099-K floating around that caused a bit of confusion on which to file. We will cover 1099-NEC, 1099-MISC, 1099K that impacts small businesses.
Difference Between 1099-NEC, 1099-MISC, 1099-K And Who Receives Them:
Issued to independent contractors, freelancers, side gigs paid more than $600 within the year. Examples:
IT, web designers, programmers
Report payments of $10 or more made in the course of a trade or business in gross royalties or payments of $600 or more made in the course of a trade or business in rents or for other specified purposes (IRS.gov). Example:
Office Rent/Lease payments
Who Does Not Receive A 1099-NEC Or 1099-MISC
Incorporated businesses such as S Corporations and C Corporations do not receive a 1099-NEC or 1099-MISC.
Vendors and independent contractors paid through third party networks like credit cards, Square, and PayPal. They will receive a 1099-K (Payment Card and Third Party Network Transactions) if paid over $600 within the year.
Foreign contractors that performed work outside of the US do not receive a 1099-NEC or 1099-MISC. It is best to have the foreign contractor complete a Form W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting. This certifies that the foreign contractor is not a U.S. taxpayer.