Form 1099-MISC vs. Forms 1099r 2024

Many business owners don't quite understand what their responsibilities are as it relates to issuing 1099s. There are two types of 1099 forms: 1099 NEC, which stands for non-employee compensation, and 1099 MISC, which stands for miscellaneous. In this video, I'm going to demystify and clarify the rules surrounding these forms and answer the question of whether you, as a business owner, need to issue a 1099. Before we continue, I highly recommend watching this video in its entirety because the rules have recently changed and can be a bit tricky to navigate. Stick around, take notes, and do whatever you need to do to remember these rules. Now, let me explain why it's important to pay attention and listen. If you neglect to issue these forms and the IRS finds out, there will be a minimum penalty of $110. However, if they discover that you purposely avoided issuing 1099s, the penalty can skyrocket to $550. It's crucial not to overlook this obligation. Let's begin by discussing the 1099 NEC. This form is used when your business pays individuals or other businesses, such as subcontractors, for services rendered. It's important to note that this applies only to services, not for purchasing products. For example, if someone did video editing or repairs for your business, and they are not considered your employee, you may need to issue a 1099 NEC. However, there are exceptions to this rule, and it's important to review the list of exceptions to determine if you are required to issue a 1099 NEC.