Dumb, Basic Questions About Issuing 1099-NECs

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JupiterJones
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Dumb, Basic Questions About Issuing 1099-NECs

Post by JupiterJones »

I could use some help understanding how all the parts fit together when it comes to handling payments to Independent Contractors. I've been on the receiving end of 1099s plenty of times. But never have had to be on the sending side.

Let's say I have a small side-hustle where I pay a few folks to help during the year. I understand the following:
  • I get them to fill out a W-9 when they start working for me.
  • I keep track of how much I pay out to whom.
  • In January, I send out 1099-NEC forms to any of these folks that I've paid $600 or more to. (While I know there are services and software that make this easier, I think I can just do this the old-fashioned way by printing the form out and filling it in with ballpoint pen, right?)
  • I deduct all the payments as a business expense on my Schedule C
So far so good, I'm assuming. But how do I deal with the IRS end of things?
  • Do I have to make regular notifications to IRS as I pay these people, sort of like making estimated tax payments throughout the year? Or do I just notify the IRS once per year?
  • Is that simply by filing Copy A of the 1099-NEC? When do I do this? In January before (or at same time) as sending the 1099s to my contractors?
  • Do I have to do it before I file my taxes, or is it part of filing my taxes? This is my main point of confusion. I haven't seen anything explaining the overall, 30,000-foot-view concept.
  • I see that you can't really file a paper 1099-NEC Copy A. Do the fancier editions of software like H&R Block handle the filing as part of the overall tax filing? (If it's part of my taxes in the first place)
Thanks!
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Eagle33
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Re: Dumb, Basic Questions About Issuing 1099-NECs

Post by Eagle33 »

Have you tried calling IRS for help?
Need help? If you have questions about reporting on Form 1099-NEC, call the information reporting customer service site toll free at 866-455-7438 or 304-263-8700 (not toll free). Persons with a hearing or speech disability with access to TTY/TDD equipment can call 304-579-4827 (not toll free).
About Form 1099-NEC, Nonemployee Compensation
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Davistax
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Re: Dumb, Basic Questions About Issuing 1099-NECs

Post by Davistax »

JupiterJones wrote: Tue Jan 12, 2021 10:35 am I could use some help understanding how all the parts fit together when it comes to handling payments to Independent Contractors. I've been on the receiving end of 1099s plenty of times. But never have had to be on the sending side.

Let's say I have a small side-hustle where I pay a few folks to help during the year. I understand the following:
  • I get them to fill out a W-9 when they start working for me.
  • I keep track of how much I pay out to whom.
  • In January, I send out 1099-NEC forms to any of these folks that I've paid $600 or more to. (While I know there are services and software that make this easier, I think I can just do this the old-fashioned way by printing the form out and filling it in with ballpoint pen, right?)
  • I deduct all the payments as a business expense on my Schedule C
So far so good, I'm assuming. But how do I deal with the IRS end of things?
  • Do I have to make regular notifications to IRS as I pay these people, sort of like making estimated tax payments throughout the year? Or do I just notify the IRS once per year?
  • Is that simply by filing Copy A of the 1099-NEC? When do I do this? In January before (or at same time) as sending the 1099s to my contractors?
  • Do I have to do it before I file my taxes, or is it part of filing my taxes? This is my main point of confusion. I haven't seen anything explaining the overall, 30,000-foot-view concept.
  • I see that you can't really file a paper 1099-NEC Copy A. Do the fancier editions of software like H&R Block handle the filing as part of the overall tax filing? (If it's part of my taxes in the first place)
Thanks!
You do not notify IRS during the year. The only thing you do is file the 1099's.
You file all copy A's of the 1099's (must be the red copies) along with a 1096 which is a summary of total amounts reported. These can be mailed & are due by February 1, 2021.
This is not part of your regular income tax filing.
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JupiterJones
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Re: Dumb, Basic Questions About Issuing 1099-NECs

Post by JupiterJones »

Thanks, Davistax! :sharebeer
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