It’s that time of year again—1099 season! If you’re a business owner, it’s crucial to understand your IRS reporting obligations to avoid penalties and keep your operations running smoothly.
Who Needs to File 1099s?
The IRS requires businesses to file information returns (1099s) for cash and check payments made to individuals who aren’t employees. This includes non-incorporated partnerships and LLCs. Common payments that require reporting include:
- Contract Labor, Commissions, Directors Fees, and Other Services: $600 or more
- Dividends, Interest, and Royalties: $10 or more
- Professional Fees: $600 or more
- Rents (excluding payments to real estate agents): $600 or more
- Attorney’s Fees for Legal Services: $600 or more
- Payments to Attorneys for Settlements: All amounts
Most payments to corporations are exempt, except for legal services. Other types of income, such as gambling winnings and fishing income, may also require a 1099.
Electronic Filing Requirements
Due to the Taxpayer First Act, the threshold for mandatory electronic filing has dropped from 250 returns to just 10 or more aggregated information returns. If you’re filing more than 10, you must submit them electronically.
Special Note on 1099-K Forms
Online merchants and third-party payment processors (like credit card companies and payment apps) issue 1099-K forms for payments made through their platforms. If you pay vendors via credit card, those amounts should not be included in your 1099-MISC or 1099-NEC forms.
Key Deadlines
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IRS Submission Deadline for 1099-NEC: Must be submitted by February 2nd, 2026
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IRS Submission Deadline for 1099-MISC: Must be submitted by March 2nd, 2026
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Recipient Copies of 1099- NEC: Must be distributed on or before February 2nd, 2026
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Recipient Copies for 1099-MISC: Must be distributed on or before February 16th, 2026
Penalties for Late Filing
Failing to file 1099 or W-2 forms on time can result in penalties starting at $60 per form, increasing the later the returns are filed. Improper filing can also lead to substantial additional penalties.
Backup Withholding
If a payee fails to provide an identification number, you must deduct and withhold income tax at a 24% rate until the number is provided. This withholding will be remitted to the IRS.
Need Help?
The rules for 1099 forms can be complex, and unique situations may require special attention. Baldwin CPAs is ready to help you prepare and file your 1099s accurately. To get started, gather the following for each recipient:
- Name
- Address
- Social Security or Federal ID Number
- Amount and Type of Compensation
- Phone Number
- Email Address
Timely and accurate filing is essential to avoid penalties and stay compliant.
Don’t wait until the last minute! Contact Baldwin CPAs today to get expert help with your 1099 and W-2 filings. Our team will guide you through every step, ensuring you meet all IRS requirements and deadlines. Reach out now to schedule a consultation and make this 1099 season stress-free!
