Tis the Season: A 1099 Overview

1099 season is by nature challenging. Whether this is your first year having Ceterus file your 1099s or you have been using our 1099 service for years, we are happy to assist you during this critical time of the year. If you have never experienced 1099s before, this article will help set the tone for what to expect and how we can help to ensure everything is covered.

What are 1099s?

A 1099 form is a record that your entity gave or paid an individual over $600 throughout the year. The payer fills out a 1099 form and sends copies to the recipient and the IRS.

1099s are used by the IRS to understand what income individuals and companies receive. Annual 1099s are required to track the income paid to individuals and certain businesses (broadly, organizations that are not incorporated). Companies that pay for goods or services are required to file 1099s annually letting the IRS know who they paid.

When are 1099s due?

1099s are due per the IRS by January 31st. That being said, the below dates are important to keep in mind when using Ceterus for 1099 Service to ensure timely filing.

Why can't I make edits in 1099 Manager after these dates?

Ceterus places a timeline on edits in 1099 Manager to ensure our team has time to validate data and catch any discrepancies before filing. This then allows our team to clarify any questions about the data with enough time to correct this and still attempt to file by the IRS deadline.

Who is required to file 1099s?

Majority of the time, freelancers or independent contractors that are hired by small businesses may be required to fill out a 1099 if they are deemed eligible. There are also times where an employee of yours may be considered an independent contractor in the eyes of the IRS and may be required to file a 1099.

What 1099 forms will my vendors receive?

There are several kinds of 1099 forms, but Ceterus specifically files the following

• 1099-INT

• 1099-MISC

• 1099-NEC

A 1099-INT may be issued if the vendor earned more than $10 in interest from a bank, brokerage, or other financial institution. This is not as common as a 1099-MISC or 1099-NEC.

A 1099-MISC is considered a "catch-all" for income that doesn't fit into other 1099 categories. This is generally reserved for companies that were paid over $600 and have a specific tax classification, rather than individuals. 

A 1099-NEC reports money paid to individuals who worked for a company but were not necessarily employees. This form is generally required for freelancers or self-employed contractors, rather than companies that may meet similar requirements.

How do I know if my vendor is truly eligible?

Ceterus determines a list in our 1099 Manager tool for vendors we believe could potentially be eligible for 1099s. That being said, we won't always know until we receive a W9 or understand other important aspects of the vendor if they are definitely eligible or not. This is where your assistance is greatly helpful in maintaining accuracy.

Generally speaking, 1099 eligibility can be determined based on the below guidelines for each form.

1099-MISC Exceptions

With the above requirements being said for 1099-MISC, a vendor may be exempt from filing a 1099 if any of the following apply:

• The vendor is registered as an LLC (S-Corp or C-Corp)

  • Payments made with a credit card or payment card, including third-party network transactions

  • Payments for merchandise, telegrams, telephone, freight, storage, and similar items

  • Payments of rent to real estate agents

  • Wages paid to employees that are reported on Form W-2, Wage and Tax Statement

  • Military differential wage payments made to employees while they are on active duty

  • Business travel allowances paid to employees reported on Form W-2

  • Cost of current life insurance protection

  • Payments to a tax-exempt organization

  • Payments made to or for homeowners from HFA Hardest Hit Fund or similar state programs

  • Compensation for injuries or sickness by the Department of Justice as a public safety officer disability or survivor's benefit

  • Compensation for wrongful incarceration for any criminal offense where there was a conviction under federal or state law

  • Fees paid to informers as an award, fee, or reward for information about criminal activity

  • Scholarships or fellowship grants

How can I get Ceterus my vendor's information?

At Ceterus, we view 1099 season as a team effort. What does that mean exactly? We've done our best to set our users up with the toolset and information necessary to stay organized with vendor management and filing statuses. With that said, the success of each year's filings also depends on the quality of information we receive from you and helping to meet our requested deadlines to meet the overall IRS deadline for filings.

We know what you may be thinking - "This seems like a lot to manage and remember!"

Don't worry - trust us, we're here to help!

Because there are sometimes several vendors to track throughout the year, Ceterus has created a 1099 Manager tool directly within the Ceterus Bookkeeping Platform for users to stay organized throughout the year. This tool was implemented to make 1099 data more visible to you.

There are several benefits to the 1099 Manager. If you are the 1099 Primary Contact, we recommend reviewing these articles to gain the most out of this helpful platform.