As we approach the new year, we wanted to take a moment to inform you about some important changes to the IRS 1099 filing requirements for the 2024 tax year.

Key Updates:

  1. Threshold for 1099-NEC and 1099-MISC: For the 2024 tax year, if you made payments of $600 or more to independent contractors, freelancers, or vendors, you must report those payments using Form 1099-NEC (Non-Employee Compensation). For other types of payments, such as rent or an attorney, Form 1099-MISC may be required. All payments made directly from the bank (transfer, ACH, check, Zelle) would all be reported on the 1099.

  2. Reporting Digital Payments: The IRS is increasingly focusing on digital payment platforms. If you have made payments of $600 or more through platforms like PayPal, Venmo, or other third-party networks like a business credit card, these payments may need to be reported on a 1099-K form sent from the third-party vendor (NOT YOU).

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    A payment app (like PayPal®, Square®, Venmo, etc.)  is required to send Form 1099-K if the payments received for goods or services total over $5,000. However, they can send a Form 1099-K with lower amounts. Whether or not a vendor receives a Form 1099-K, they must still report all income on their tax return.

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    What happens if I paid a contractor through both a bank and a third-party app? You as the employer are only responsible for reporting the payments that fall under Key Update #1 (see above). Our reports will have the total breakdown of each vendor and how you paid them for review. We will not report any third-party payments on your 1099s.

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  3. Self-Employed or Contractor Payments: Payments to self-employed individuals or contractors must be reported accurately. If you've hired contractors, we have done our best to ensure that you have up-to-date W-9 forms on file with correct names and Taxpayer Identification Numbers (TIN).

  4. Filing Deadlines: The 1099 forms must be filed with the IRS and sent to recipients by January 31, 2025. It's crucial to meet this deadline to avoid potential penalties so please make sure to review the reports when they are sent via a task in Financial Cents.

  5. Penalties for Non-Compliance: Failing to file the required 1099 forms on time, or submitting incorrect information, could result in penalties. The IRS has strict regulations and fees for late filings, so it’s important to prepare your forms in advance.

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What Bastian Accounting will do for you:

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  1. We will deliver a report for review to outline all 1099s that your business needs to issue by 1/22/25. The first tab will outline the 1099s that will be issued and the second tab will have each transaction listed & how the payments were made.
  1. Once the report is approved, we will file 1099s on your behalf by delivering them electronically to your vendors.
  2. Relax! Once the 1099s are approved, we will send you an update.

Easy as that!

References:

-Contracted Labor and W-9 Requirements -IRS 1099-K https://www.irs.gov/businesses/understanding-your-form-1099-k#sends

-Zelle https://www.zellepay.com/faq/does-zelle-report-how-much-money-i-receive-irs -Paypal https://www.paypal.com/us/cshelp/article/current-form-1099-k-reporting-thresholds-2024-update-help1131

-Venmo https://help.venmo.com/hc/en-us/articles/4407389460499-Venmo-Tax-FAQ

-CashApp https://cash.app/cmp/1099-K