Do I have to complete a Form 1099-NEC for an Independent Contractor?

Forum|Forum|3 years ago
January 29, 2023
1 reply
3 views

Hello, I have rental property and paid monies in the amount of $900 for plumbing work to an Independent contractor. He is not an employee. I found him online. Do I have to prepare and send him a 1099-NEC? Thanks.

DavidD66

Level 15

Yes, unless the business you hired is a corporation, or an LLC that has elected S-Corp status you need to send a Form 1099-NEC. It can be difficult to get tax IDs and related information from contractors after the fact, so I suggest you print out some blank Forms W-9, and whenever you hire a contractor have them fill one BEFORE you pay them.

If a business fails to issue a form by the 1099-NEC or 1099-MISC deadline, the penalty varies from $50 to $280 per form in 2022, depending on how long past the deadline the business issues the form. There are maximum fines per year for small businesses. If a business intentionally disregards the requirement to provide a correct payee statement, it's subject to a minimum penalty of $570 per form in 2022 or 10% of the income reported on the form, with no maximum.

Filing it after the fact would be better than not sending. That said, the chances that the IRS comes after you because of a single $900 1099-NEC are very, very remote.

For more information on 1099s, click on Penalties for Missing the 1099-NEC or 1099-MISC Filing Deadline

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charjean47Author

Level 6

I asked the business if they were and LLC and they said yes. What is S-Corp Status. I did not asked him about that.

AliciaP1

Level 13

In order to provide a Form 1099, you are required to request a Form W9 from your contractor. This form identifies the type of business you paid as well as their ID number you need to file the Form 1099 for. Best practice would have you request this form and receive it before you make your first payment to the contractor. But, you are only required to send a Form 1099 if your rental activity is considered a business.

Per the IRS:

Trade or business reporting only.

Report on Form 1099-NEC only when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit.

@charjean47

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