1099 in early 2022 is a hot topic. It's all over the news and the world is freaking out about 1099s. Remember, the IRS changes the rules all the time.
So don't freak out!
The IRS changes the rules anytime they want and sends whatever letters they want, whenever they want, and for any reason they want. They have what it takes to take what you have. This includes your sanity and peace of mind, not just your money.
That’s why you're supposed to always report all your income, no matter how you earned the income or who you earned it from.
All that being said, the IRS is not your boss. You shouldn’t let the IRS freak you out. At the end of the day, when those IRS notices come, it's your responsibility – it's your return, your forms, your reporting.
Tax pros and companies can help keep it all straight for you and get it right but, ultimately, you have to have a clear understanding of everything that’s happening. You're going to be the one who has to stand up for it or deal with it.
What is a 1099?
A 1099 is something the business owner or a merchant provider should do. For instance, if someone pays you money, they need to use a 1099 to report that to the IRS.
Common types of 1099s:
- 1099-NECs for non-employee compensation (new in 2021)
- 1099-MISC for reporting rent or paying an attorney or royalties
- 1099-K for third-party payment providers (ex. eBay, Amazon, PayPal, or Venmo) that have paid you for goods or services
Why Do 1099s Exist?
1099s are for the benefit of the IRS. Once the IRS gets a report on how much individuals get paid, they cross-reference those 1099s or W-2s to the tax returns to make sure that the taxpayers are reporting on the income they need to be reporting.
Taxpayers get notices when their gross income does not equal or exceeds the reports they have gotten from other vendors. The IRS has been more vigilant than ever to make sure what got reported is matched against your tax return.
Deadlines for 1099 Reporting
The forms have to be out by January 31st of each year both to the recipient and to the IRS. There is no extension on that deadline so you have to make sure you have your books updated. These deadlines are put in place for the benefit of everyone involved in the process.
It's not just about you and it's not just about the IRS. There are other people involved in the decisions and actions you take, as well as in taking care of your books and doing the things you're supposed to do in your business.
If you want to learn more about 1099 reporting, check out Episode 073: 1099 Reporting & New Laws for 2022.
