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MorganB
MorganB
December 17, 2024

Small Business 1099

  • December 17, 2024
  • 1 reply
  • 0 views
Hello friends of the Community! I'm here to share an article from the QuickBooks Blog that answers some frequently asked questions about the 1099 tax form. Let's take a look...
 
  • "If small businesses pay certain expenses or receive certain forms of income, they will either need to send or receive a Form 1099. The IRS sets thresholds that will determine whether you need to fill out a 1099 form. For the most part, the IRS sets the minimum for 1099 forms at $600. "
 
The most common 1099 forms are:
 
1099-MISC
  • Miscellaneous income
  • Limit $600
  • Examples: rent, prizes, and awards
1099-NEC
  • Nonemployee compensation
  • Limit $600
  • Example: payment to freelancers
1099-K
  • Payments via third party networks
  • Limit $5000 (2024 tax year), $6000 (2025+ tax year)
  • Example: payments via PayPal or Venmo
 
"When hiring for your small business, it's important to understand the distinction between in-house employees and contractors. This difference has significant implications for tax obligations and reporting."
 
Employee
Employers withhold taxes (local, state, and federal) from an employee's paycheck. Businesses issue a W-2 form to report wages and the taxes withheld to both the employee and the IRS at the end of the year.
 
Contractor
If a contractor is paid more than $600 in a year, the business must issue a 1099-NEC to report the total payments. However, no taxes are withheld from these payments.
 
The article linked above contains even more info about the 1099 forms like other types of the form, when you need to send them in, and state-specific considerations. I hope this posts answers any questions you may have had about the 1099 and remember, the Community is always a great place to check if you need a hand with your tax forms. Take care!

      1 reply

      FishingForAnswers
      FishingForAnswers
      December 17, 2024

      To head off some common misunderstandings amongst business owners here, vis a vis the 1099-K:

       

      No, you almost certainly will never issue a 1099-K to anybody. It is something most business owners receive, not something most business owners issue.

       

      No, you do not add credit card payments, debit card payments, or in general, electronic payments to the 1099-NECs you issue to your contract laborers. Yes, you can still write off those amounts, just not as the account type you have tied to your 1099-NEC. If it's not check, cash, money order, and maybe bartering(?), keep it off the NEC.

       

      Either those amounts you paid electronically will already be reported to the IRS on the 1099-K prepared by whatever merchant account provider your contract laborers have, or your contract laborers are trying to use their personal Paypal or such like for business payments, and are probably going to find themselves in hot water down the road.

       

      In either case, it's not your problem to try to fix. If you put those amounts on the 1099-NEC, you are risking causing your contract laborers to have the same income reported to the IRS twice, potentially costing them a great deal more in income taxes. Save everybody, and especially the accountants, the headache and Do Not Do It.

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