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There are several forms that circulate during the tax season, one of which being form 1099-MISC, which is intended for filing by independent contractors, provided by small business owners that utilize the services of independent contractors, pay royalties, or encounter various other costs. The form is to be supplied by the small business owner to the state tax department and the IRS before the end of February for the filing year, and supplied to those that payments are paid to before the January 15 the following year after services are rendered or costs are incurred.
Form 1099-NEC is a tax form that is used to represent all miscellaneous income that was received during the year. Typically, this income is received through a variety of sources including:
- Contracted pay
- Fees, commissions, or rent
- Payment towards prizes, rewards, or legal services
- Golden parachute payments in excess
- Medical or health care payments received
Small business owners are most impacted by the form when more than $600 is paid to a non-employee of the business or if $10 or more is paid into royalty payments during the fiscal year. In these cases, the small business owner must complete the form 1099-Misc and proceed to provide to those that received the payments and the appropriate tax agencies and departments.
The tax year follows a January-to-January cycle, with taxes completed on costs and income during the year on the following tax year. The tax season usually takes place between January 15 and April 15; however, small business owners are bound by different time restrictions. Providing the 1099 to the appropriate recipient is to be done before January 15th the year following costs paid by the small business owner. All 1099s should also be provided to the IRS before the last day of February in order to ensure accurate information within the tax department.
Only small business owners that incur these costs during the fiscal year must submit a form 1099-NEC, which will be filed with the recipient's tax filings. If there are no contracted payments paid to independent contractors or any royalties paid during the fiscal year, there is no need for the 1099. The form is a 5 part form with designations of each part to the respectable party which is either the payer, the recipient, the IRS or the local state tax department that presides over the locality in which the income is received.