Issuing 1099s can be a hassle for small businesses. The recent shift to Form 1099-NEC makes it especially important to test your knowledge ahead of 2021 tax filing deadlines.
Test Your 1099 Knowledge
Issuing 1099s can be a hassle for small businesses. To make sure you’re prepared ahead of 2021 tax filing deadlines, we’ve created this 1099 quiz to test your knowledge of what’s new and what you need to do to prepare.
True or false: You should report nonemployee compensation on Form 1099-MISC.
This is false. Non-employee compensation is now reported on Form 1099-NEC, while most other payments that you’ve previously reported on Form 1099-MISC should still be reported there.
This change was instituted last year, but it may still cause confusion, both for businesses and for vendors who aren’t used to receiving two forms. That’s one reason to plan ahead, prepare forms as early as possible, and communicate with your vendors as needed.
True or false: Form 1099-NEC is due by Jan. 31.
This is true. Paper or electronic copies of Form 1099-NEC should be filed with the IRS by Jan. 31, the same date by which the form should be sent to your vendors and independent contractors. Some states also require filing Form 1099-NEC, so be sure to check your state requirements.
True or false: Failing to issue a Form 1099-NEC could cost your business $270.
This is true. If your business fails to issue either a 1099-NEC or 1099-MISC by the Jan. 31 deadline, the penalty is $50 to $270 per form, depending on how long past the deadline you issue the form.
True or false: You only have to issue Form 1099-NEC if you paid a nonemployee over $500.
This is false. The cutoff is $600, not $500, above which you must issue Form 1099-NEC.
True or false: Form 1099-NEC is not used for payments to attorneys and accountants.
This is false. Box 1 of Form 1099-NEC should include a variety of forms of nonemployee compensation, including:
- Professional services fees, including fees to attorneys, accountants, architects, and other professionals
- Service payments, sometimes including payment for parts and materials
- Director fees and similar remuneration
True or false: The best way to ensure 1099 compliance is by manually checking every form.
This is false. Year-end is so busy for small businesses that the last thing you want to do is spend precious hours manually checking 1099 forms! You can automate the whole process with the latest software, so your 1099 forms are generated and filed automatically for each vendor, relieving you of the hassle and risk of manual errors.
Get the support you need
BST offers a broad portfolio of accounting and auditing, tax, consulting, and wealth management services, as well as valuation, forensic accounting, and litigation support. Our business tax services include preparing federal and state returns and ensuring full compliance with local and multi-state tax laws.
