1099 Reporting for the 2024 Tax Year
The New Year brings resolutions, goals, and yes…taxes. Most businesses have trusted tax professionals who will be handling their 2024 finances and tax reporting; in fact, Critical Connexion partners with the very best tax and financial experts who assist our clients all year round.
However, it is still imperative that business professionals stay up to date on the latest tax trends and reporting changes. For example, last year the United States House of Representatives overwhelmingly passed the Tax Relief American Families and Workers Act (H.R. 7024), which contains important changes to reporting 1099 forms. Although this house bill is stalled in the Senate, it could go through in 2025 and change the thresholds for reporting compensation for nonemployees.
As our first blog of 2025, we thought it was important to review the primary 1099 forms used by businesses, when you need to use and file each one, and the penalties for failing to comply with the IRS’s reporting requirements.
What Is Form 1099 Exactly?
If you are working with an individual, business, or other entity that is not an official employee at your organization, you will need to file Form 1099 with the federal and state tax authorities, and distribute it to the payee if they made more than $600 in a year (along with other threshold requirements we will discuss in detail below).
Although there are more than 20 different types of 1099 forms, we would like to define the three most common–1099-NEC, 1099-MISC, and (to a lesser extent) Forms 1099-K:
- FORM 1099-NEC: Reports income from nonemployee compensation, such as freelancers, independent contractors, real estate agents, landscapers, cleaning professionals, or consultants.
- FORM 1099-MISC: Reports income from any miscellaneous sources not covered by any of the 22 other 1099 forms, such as rents, prizes and awards, fishing boat proceeds, medical and healthcare payments, attorney payments, or cash paid from a notional principal contract.
- FORM 1099-K: Reports income from payment card transactions (credit, debit, gift cards, etc.) and third-party network transactions (payment apps, online marketplaces, third-party payment settlement organizations).
All 1099 forms are required to be submitted to both the IRS and the payee so that the government can track the amount of tax they should expect to receive from these non-employees.
We will discuss Forms 1099-NEC and 1099-MISC because they are primarily used to report income you received from the direct sale of goods that were resold anywhere except for your permanent retail establishment. Let’s look at these two common forms in more detail.
FORM 1099-NEC and 1099-MISC 2024 IRS Rules
The IRS requires Form 1099-NEC to be used to report payments of more than $600 to nonemployees or direct sales of at least $5,000 for consumer products to a purchaser without a permanent retail establishment for resale.
Similar to Form 1099-NEC, Form 1099-MISC also has a threshold of $600 or more for miscellaneous income and a $5,000 minimum requirement for reporting direct sales of consumer products to a buyer without a permanent retail establishment for resale. However, this form is also required to report at least $10 in royalty payments, backup withholding of income taxes, or broker payments in place of dividends or interest.
NOTE: The 1099-K reporting threshold is currently $20,000 and 200 transactions, but these thresholds are scheduled to change and should be monitored regularly.
Forms 1099-NEC and 1099-MISC Filing Deadlines for 2025
The Form 1099 filing deadlines for payments your company made in 2024 are different for a 1099-NEC and a 1099-MISC.
If you are filing a 1099-NEC the due dates are simple – this form is due to both the recipient and IRS on January 31, 2025 (whether it is done electronically or through a paper filing).
Filing Form 1099-MISC is a bit more complicated, as there are different due dates for recipients and the IRS, as well as different due dates if you’re filing electronically versus on paper. In addition, the due dates to the recipient change depending on if there is data in boxes 8 (Substitute Payments in Lieu of Dividends or Interest) and 10 (Gross Proceeds Paid to an Attorney).
For 2025, the due dates for Form 1099-MISC are as follows:
- Due to the recipient is on January 31, 2025 (without data in boxes 8 or 10)
- Due to the recipient is on February 15, 2025 (with data in boxes 8 or 10)
- If filing on paper, it is due to the IRS on February 28, 2025 (with or without data in boxes 8 or 10)
- If filing electronically, it is due to the IRS on March 31, 2025 (with or without data in boxes 8 or 10)
It is important to submit these forms by the above due dates because, once received, the recipients will use the Form 1099 to complete their income tax returns by April 15, 2025.
Penalties for Not Filing Form 1099
It is not wise to decide to simply not file your company’s 1099 forms since the IRS will penalize you monetarily for EACH Form 1099 you do not file:
- $60 per return if you correctly file within 30 days of your required due date, with a maximum penalty of $664,500 per year ($232,500 for small businesses).
- $130 per return if you correctly file more than 30 days after the due date but by August 1, with a maximum penalty of $1,993,500 per year ($664,500 for small businesses).
- $330 per return if you file after August 1 or you do not file required information returns, with a maximum penalty of $3,987,000 per year ($1,329,000 for small businesses).
NOTE: The IRS will consider your company a “small business” if it has average annual gross receipts of $5 million or less for the three most recent tax years (or for as long as your company has been in operation, if shorter than the three-year period).
What is House Bill 7024 and How May It Affect Form 1099 Reporting?
In 2024, the House of Representatives approved the Tax Relief American Families and Workers Act of 2024 (H.R. 7024). This bipartisan bill included an important change for reporting Form 1099-NEC and 1099-MISC (it doesn’t appear to affect 1099-K at this point):
H.R. 7024 increased the reporting threshold from $600 to $1,000 and decreased the threshold for payments of direct sales from $5,000 to $1,000 for payments made on or after January 1, 2024.
It is important to note that, although the House did pass this bill, it was not yet passed in the Senate. That being said, Senator Chuck Schumer made a motion for the Senate to reconsider the vote. If passed, these thresholds would be tied to inflation in future years. We will continue to monitor this legislation in 2025.
Don’t Wait to File!
It is important to understand when you need to file Forms 1099 and which form you are required to use – remember, there are 22 different 1099 forms, and we only discussed a few! Whether you need to file a Form 1099-NEC or 1099-MISC (or Form 1099-K for card payments), these can be some of the most confusing tax forms you will need to complete as a business.
Don’t worry – as long as you have kept your accounting records up to date for 2024 and you know who you have paid as a nonemployee, your accounting team should have no problem completing these arduous financial tasks. Just don’t wait until the last minute to file these forms to both the recipients and the IRS!!
We also recommend you discuss these forms in more detail with your tax advisor or CPA, and Critical Connexion has experienced tax partners who are ready to help you with any Form 1099 questions or confusion.
About Critical Connexion:
Critical Connexion is a distinguished business management & consulting firm that focuses on leveraging a foundation of leading finance, HR management, strategic sourcing, risk & operations experts to accelerate brand success for clients.
We specialize in navigating the evolving landscape of corporate growth by adeptly addressing changing systems, processes, and people requirements. Recognizing the substantial nature of technology and changing business needs, we ensure that these resources are directed with foresight and expertise. We are your extended partners for business growth, scaling seamlessly and brand elevation.
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