It’s That Time Again: Essential 1099 Tips for Business Owners & Entrepreneurs

Introduction:

Hello, fellow business owners and entrepreneurs!

December is here, and you know what that means—it’s 1099 season! As we close out the year and gear up for 2025, it’s time to get serious about preparing your 1099 forms. The world of taxes can be complex, but it doesn’t have to be overwhelming. As a 1099 taxpayer, you're responsible for tracking your income, expenses, and deductions. The good news? With the right strategies, you can save significant money and reduce stress.

In this guide, we’ll walk you through everything you need to know about navigating 1099 filings and thriving financially in 2025. From understanding the forms to organizing your financials year-round, this guide has you covered.

Understanding the 1099 Form

The 1099 form is how clients or platforms report your earnings to the IRS. It applies to independent contractors, freelancers, and business owners who earn income outside of traditional employment.

Example Tip:

“If you earn $600 or more from any one client, you’ll likely receive a 1099 form. But even if you don’t receive one, you’re still responsible for reporting all income!”

Types of 1099 Forms You Should Know

• 1099-NEC

For reporting non-employee compensation. This form is typically issued to independent contractors, freelancers, and any non-corporate service provider paid over $600 in a year.

• 1099-MISC

Used for reporting miscellaneous income, including rent, royalties, and other forms of income that don’t fall under the 1099-NEC category.

• 1099-K

The IRS is phasing in new reporting thresholds for Form 1099-K:

• 2024: Transactions totaling over $5,000.

• 2025: Transactions totaling over $2,500.

• 2026 and beyond: Transactions totaling over $600.

These thresholds pertain to third-party payment platforms like PayPal and Venmo. However, all income is taxable, regardless of whether it’s reported on a 1099-K.

• 1099-DA

New for 2025, this form covers digital asset transactions. If you traded or sold digital assets like cryptocurrency through a broker, you’ll likely receive this form.

Who Needs to Send/Receive a 1099?

• Who Should File: If you paid an independent contractor, freelancer, or service provider $600 or more in 2024, you’re responsible for issuing a 1099-NEC by the deadline.

• Recipients: Contractors and gig workers should expect 1099 forms from each client who meets the $600 threshold.

When Do You Need to File?

The IRS deadline to issue 1099 forms to contractors and file them is January 31, 2025.

Here’s a breakdown of the timelines:

• Paper Filing: Postmarked by January 31, 2025.

• E-Filing: Must be submitted by January 31, 2025.

• State Requirements: Check if your state requires additional filings to avoid penalties.

How to File 1099 Forms

1. Accounting Software:

Platforms like QuickBooks, FreshBooks, and Zoho offer 1099 e-filing services for a small fee, making it easy to handle multiple filings.

2. Direct IRS Filing:

If you only have a few forms to file, you can submit them directly to the IRS, either by paper or electronically.

3. Hire a Tax Professional:

When in doubt, trust a tax advisor or accountant to ensure accuracy and compliance. This is especially useful if you have multiple contractors or complex filing needs.

Staying Organized Year-Round

1. Keep Records: Maintain a detailed record of all payments made to non-employees throughout the year.

2. Verify Contractor Details Early: Collect and verify W-9 forms before making the first payment.

3. Review Payment Categories: Double-check which payments qualify for 1099 filings to avoid errors.

Pro Tip:

"Always double-check your filing for accuracy and consider working with a professional to avoid costly errors.”

FAQs

What happens if I don’t file on time?

Missing the deadline can result in penalties, starting at $50 per form and increasing the later you file. The IRS expects timely filings, so don’t wait until the last minute.

Will I be taxed on all my 1099 income?

Yes, all income reported on a 1099 is subject to income tax. Be sure to include this income in your tax return to avoid penalties.

Conclusion

It’s that time again! December is your chance to get ahead of 1099 season, streamline your filings, and set yourself up for financial success in 2025.

At Choice Accounting Partners, we’re here to help. Whether you need guidance on filing 1099s, year-end financial planning, or developing a tax strategy for the new year, our team has the expertise to make tax season stress-free.

Need more insight and support? Contact us today to schedule a consultation. Let’s make this your best tax season yet!