Key Takeaways: 

• Forms 1099 are a series of informative forms that document different types of payments done by an individual or entity, in general, different from those made to employees.
• The 2 most common types of 1099 forms used by startups are 1099-NEC and 1099-MISC.
• The 1099-NEC form is used to inform annual payments made to freelancers and contractors over $600.
• The 1099-MISC form is used to inform annual payments to vendors, suppliers, and providers of other types of products or services. 
• The due date for forms 1099-NEC and 1099-MISC is January 31st. 

👉Click this link to take a quick auto-test and check if you should fill out a 1099 form.

You may have heard about Form 1099 during Tax Season. And right now we are going to tackle them so you can comply with all your startup obligations before the due date. 

There is a wide variety of 1099 forms, to record payments made to another party (other than an employee). Due to the fact that 1099 Forms serve as a record of payments, individuals might acquire multiple 1099 Forms at one time.

For startups, the most common 1099 forms are the 1099-NEC and 1099-MISC. In most cases, these will be the only 2 types of Form 1099 you’ll ever have to fill out. Let’s get right into them. 

The 1099-NEC and 1099-MISC are the two most common 1099 forms for startups❗

The 1099-NEC is used to report non-employee compensation for independent contractors, freelancers, sole proprietorships, and the self-employed. Most sellers who pay more than $600 a year will receive this form. Examples of eligible payments are contract payments and payments for fees and services to non-employees.

The 1099 MISC is used to report various payments not covered by the 1099-NEC. Royalties must be at least $10, and rent, prizes and incentives, medical and health expenses, and attorney’s fees must be at least $600.

How can startups prepare for tax season during the year?

The 1099 process can be tedious, but by organizing ahead of time and staying on track throughout the year, you’ll be better prepared for tax season. 

We reached out to Lazo’s tax team for tips on how to help your business get 1099 ready. Their tips were: 

1. Designate a 1099 contact or team to oversee the 1099 review and submission process.
2. Create a 1099 process and ensure all team members follow it:

• Obtain a W-9 Form at the beginning of every relationship with a supplier, to ensure that when the time comes, you have all the necessary information at hand.
• Complete part of the annual contractor and supplier payment review by the end of September to ensure you have the required W9s and tax registration numbers. 

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2. Finally, start the 1099 review process early. The end of the year is a busy time for holidays, so you want to give yourself plenty of time. November is the best time to start gathering information. 

Should my Startup file a 1099 form? Quick Autotest

Lazo has developed a simple autotest that will help you figure out if you should fill out any 1099 forms. You can access it by using this link.

The Lazo Team💜.