Get Ready for the New Form 1099-NEC
Updated: Jan 1, 2021
Due to changes made this year to Form 1099s, it's important to make preparations on how to handle the new requirements. Here are three tasks to consider that will make meeting your business's 1099 information reporting requirements less stressful this tax season.
Review your general ledger. Even if you've already identified 1099 vendors in your payables system, review current year expenses to make sure no new or infrequent payments have been overlooked. For example, it's easy to forget that fees totaling $600 or more paid to service providers must be reported on a Form 1099. But be careful! There is a new form this year, Form 1099-NEC. Be sure to know whether you should use the existing Form 1099-MISC or the new Form 1099-NEC.
Verify vendor information. Check your files for up-to-date Forms W-9, the form you use to request a vendor's federal taxpayer identification number (TIN). In general, you should have Form W-9 on file for each vendor who provides services, even if the transaction is a one-time event. Why? Filing mismatched 1099 forms - where the combination of name and TIN do not match IRS records - will result in a notice, and possibly penalties. To avoid problems, consider signing up for the TIN Matching Program, an online service run by the IRS, so you can verify identification numbers prior to filing 1099s.
Order the proper forms. If you plan to file paper forms this year, the copy you mail to the IRS must be on forms pre-printed with scan-friendly ink. You'll also need Form 1096, the annual summary, for each type of information return you file.