One tax form you’ve likely come in contact with—either having to send or receive them in the mail—is a small business 1099 form. Many types of 1099 forms exist, although small business owners will only need a couple. If you’re wondering which Form 1099 you should be using and how you should be filing them, let’s take a deeper look at key small business 1099 forms:
How small business 1099 forms work
If small businesses pay certain expenses or receive certain forms of income, they will either need to send or receive a Form 1099. The IRS sets thresholds that will determine whether you need to fill out a 1099 form. For the most part, the IRS sets the minimum for 1099 forms at $600.
For example, if you receive over $600 in miscellaneous income, such as prize money, you’ll likely get a 1099. Or if you pay a freelancer more than $600, you’ll need to send them a 1099. There are 1099s for all sorts of transactions, such as interest income, real estate proceeds, and debt cancellation.
The most notable small business 1099 form is the Form 1099-NEC. Form 1099-NEC is for reporting nonemployee compensation. Typically, when someone asks about a small business 1099, they’re talking about the 1099-NEC form. Also known as the contractor tax form, small businesses send this form to independent contractors to whom they pay more than $600 during the year.