Small Business 1099 Form: Requirements, Deadlines, & More

A small business 1099 form is a tax form used by startup and small business owners to report all non-employee compensation and payments made to freelancers, non-employees, and other 1099 recipients.

The 1099 form that small business owners must take note of has several variations, and we’ll discuss them one by one in this article. We’ll also explain the important tax filing deadlines for 1099 forms and some tips to remember when preparing your small business 1099 forms.

Key Takeaways

• Small business 1099 is a variety of 1099 forms used by small businesses to report nonemployee compensation and payments made within the year.
• The most common types of small business 1099 forms that startups typically use include 1099-MISC, 1099-NEC, 1099-DIV, 1099-K, 1099-R, and 1099-INT.
• The penalties for missing a 1099 form deadline range from $60 to $310, depending on the amount of time that has passed since missing the set filing due date.
• Business owners who deliberately neglect to file their 1099 forms must pay at least $630 in penalties for each missing 1099 form.

What is a Small Business 1099 Form, & How Does It Work?

A small business 1099 form, also called a small company 1099, is used to report specific income and payments made to non-employees.

These 1099 forms for small businesses are crucial during tax filing season because they aid business owners in assessing their expenses.

The individuals who typically receive a 1099 form from small businesses include:

• Freelancers, independent contractors, or gig workers
• Providers of rental property services
• Attorneys
• Shareholders of interests and dividends
• Organizations or individuals who receive at least $10 in royalty payments

Since there are several different types of Form 1099s, employers must know the correct form to furnish to ensure the contractors and workers they hire also get to file their taxes on time.

Small Business 1099 Form Types

As we have mentioned earlier, there are a couple of variations of Form 1099 for small business owners.

Startup and small business owners should pay close attention to the following 1099 forms:

#1. Form 1099-MISC

Form 1099-MISC, Miscellaneous Information, is used to report miscellaneous payments paid to individuals or workers who are not included in your payroll.

These miscellaneous payments include:

• Royalty and broker payments worth at least $10
• At least $5,000 worth of consumer goods not sold in permanent retail stores
• Crop insurance proceeds
• Payments to attorneys as part of a contract or legal agreement
• Rent
• Fishing boat proceeds
• Medical and healthcare payments
• Fish and aquatic animals that are sold for reselling
• Awards and prizes

#2. Form 1099-NEC

Form 1099-NEC, Nonemployee Compensation, is used to report all income paid to gig workers, freelancers hired for short-term or project-based work, or independent contractor jobs.

Also known as the 1099 form for independent contractors, the 1099-NEC was recently revived by the IRS after taxpayers reported confusion over the use of the 1099-MISC to report both independent contractor income and miscellaneous payments.

Sole proprietors may also be 1099-NEC recipients, provided that they are taxed as an LLC sole proprietorship and not permanently employed by the business that hired their services.

#3. Form 1099-K

The third type of small business 1099 form is called Form 1099-K, Payment Card and Third Party Network Transactions.

Small business owners who made or received payments worth $600 or more using credit or debit cards and third-party settlement organizations (TPSOs) such as PayPal and Venmo typically receive this tax form from banks, financial institutions, or third-party applications.

#4. Form 1099-DIV

If your business owns investments that collect more than $10 worth of dividend income annually or stocks that pay dividends, then you are likely to receive Form 1099-DIV, Dividends and Distributions.

The 1099-DIV is usually sent to you by your bank or financial institution.

When using Form 1099-DIV to report your dividends, you must also be mindful of the different dividend tax rates imposed on your ordinary dividends, qualified dividends, and non-dividend distributions.

#5. Form 1099-R

You may also have to furnish Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

The 1099-R form is an informational return that is used to report pensions, annuities, and distributions of other retirement benefits and profit-sharing plans worth more than $10.

#6. Form 1099-INT

The last type of small business 1099 form that you may encounter as a startup or small business owner is Form 1099-INT, Interest Income.

You will usually be required to prepare this IRS form if you need to report interest income.

Specifically, if you own a bank account or investment that generated more than $10 in interest within the year, then you must report the said type of income to the Internal Revenue Service.

Who is Required to Send the 1099 Forms?

Generally, business owners or entities that have made at least $600 worth of payments to individuals and organizations that are not included in their payroll must submit 1099 forms.

Sending small business 1099 forms is more common for business owners because they generally have to hire the services of both employees and contractors and make certain investments and contributions to improve and sustain their operations.

Missed Deadline Penalties

Failure to file or prepare the said IRS tax form may subject them to the following late filing penalties:

1099 Form Deadlines

If you are wondering when you are required to issue a 1099, jot down the following 1099 form deadlines to avoid incurring penalties:

• January 31. The deadline for sending the contractor’s copy of their 1099-NEC form or filing the paper or electronic version of Copy A of the same form. This is also the same deadline for sending Copy B of 1099-MISC to the payee, as well as the recipient copies of 1099-K, 1099-INT, and other 1099 forms.

• February 28. Copy A of the 1099-MISC form must be filed with the IRS if filed on paper. The paper filing deadline for other 1099-DIV, 1099-INT, 1099-K, and 1099-R also falls on the same date.

• March 31. The deadline for electronically-filed Copy A of the 1099-MISC form.

• April 1. The due date for e-filing 1099-MISC, 1099-INT, 1099-DIV, 1099-R, and 1099-K.

Small Business 1099 Form: Filing Requirements

There are also small business 1099 filing requirements that you must remember, aside from the tax filing deadlines and possible penalties enumerated above.

Issuing and Filing

Before preparing the specific 1099 form, make sure you acquire a duly completed Form W-9 from your payee or contractor. You will need all the details specified in their W-9 form when filling out their 1099 form.

Upon furnishing the form, send the required copies to your vendor, contractor, or non-employee recipient. You must also note the specific due dates for paper filing and electronic filing of 1099 forms.

Keep in mind that if you are filing a minimum of 250 1099 forms, then you must use the IRS FIRE system (Filing Information Returns Electronically).

1099 Copies

Some of these requirements also have to do with all the different copies of small business 1099 forms you will be furnishing or filing for the tax year, namely:

• Copy 1. Send this copy to your state tax department only if you are required to do so.

• Copy A. Send this copy to the Internal Revenue Service.

• Copy B and Copy 2. Both copies are sent to the payee or recipient of the 1099 form.

• Copy C. You will keep this copy and include it in your tax records for the year.

5 Practical Tips for Small Businesses Filing 1099 Forms

You can ensure a seamless and error-free small business 1099 filing process by simply following the following useful tips for preparing your 1099 forms:

#1. Keep Accurate Records

Whether you made miscellaneous payments, earned dividends or interest income, or employed contractors to fulfill a job, you must take note of all the money that goes in and out of your business.

The more organized and accurate your tax and payment records are, the easier it will be for you to identify any errors and resolve them immediately.

#2. Double-Check Before Filing

Make it a habit to verify all the information provided to you by your 1099 recipient. Take the time to go over their Form W-9 and compare them with your records.

It would also be beneficial to know how to spot a fake 1099 form to avoid getting entangled in fraudulent schemes without your consent and knowledge and potentially facing serious legal action later on.

#3. Be Aware of the Deadlines

We’ve already listed the important small business 1099 filing deadlines for you. All that’s left for you to do is mark your calendars and set your alarms to ensure you don’t miss any of the key due dates.

If, for any unforeseen reason, you are unable to file or furnish the 1099 forms on time, then try not to prolong the time it takes for you to fulfill your tax obligations after the due date.

#4. Use a 1099 Form Generator

Paystub.org offers a 1099 form generator, which is perfect if you have to prepare multiple small business 1099 forms for different individuals and organizations.

To use our 1099 form generator, all you have to do is fill in the blank fields with all the important information about the income and taxes that you must report.

You can preview all the information on your 1099 form before proceeding to generate, download, or print your own copy. Our generator is 100% regulations-compliant and user-friendly.

#5. Know Your Tax Forms

If you hire both workers included in your payroll and independent contractors, then you should know how to distinguish when to use a 1099 vs. a W-2 form.

You must also be knowledgeable when it comes to differentiating a 1099-NEC vs. a 1099-MISC form to avoid sending the wrong type of 1099 form to your contractors or vendors.

Final Thoughts

Knowing when to issue, how to file, and how to distinguish all relevant small business 1099 forms is a must if you want to accomplish all your tax-paying duties efficiently.

Conversely, here are some highly recommended and relevant tax articles to help you expand your tax filing knowledge:

• Top 9 Strategies On How to Reduce Taxable Income
• 13 Tax Myths Debunked: How to Identify False Tax Information
• A Complete Guide to the Different Types of Taxes & Their Importance

1099 Form For Small Businesses FAQ

#1. When are you required to issue a 1099?

Generally, you are required to issue a 1099 if you paid at least $600 in non-employee compensation to an independent contractor, entity, or vendor.

#2. How much does a business have to make to get a 1099?

To get or receive a small business 1099, a business must earn at least $10 in dividends, interest income, or retirement benefit distributions, or at least $600 in miscellaneous payments such as rent, awards, prizes, and medical and healthcare payments.

#3. Can a small business have 1099 employees?

Yes, a small business can have 1099 employees or independent contractors. In truth, independent contractors and other 1099 recipients should not be referred to as employees since they are not included in a company’s payroll system.

#4. Am I required to report all of my income?

Yes, you are required to report all of your income on your tax returns, regardless of whether you make a living out of your business income, interests, dividends, or miscellaneous payments. The key is to avoid unnecessary IRS audits by deliberately withholding any information about your earnings.