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When Are 1099s Due? The Deadlines You'll Need To Remember
7
Min Read
If you've procrastinated on filling out your 1099 form(s), you're not alone. Tax season can be stressful, and with changing 1099 deadlines, it doesn't get any easier.
Reporting the income you paid out to people like contractors and freelancers over the year doesn’t have to be stressful. You can prepare ahead of time by learning about what you need to file and know when deadlines for your 1099 freelance taxes.
Here's what you need to know about when 1099's are due, and how to avoid penalties that you may acquire if you forget to file or file late.
Note: If you would like filing reminders sent to you so you don't receive a penalty and an easy way to track deductions, try Bonsai Tax. Our app can automatically send you filing reminders as well as discover, record and organize all of your tax deductions automatically. Users save on average $5,600 a year. Try a 14 day free trial on the house.
Types of 1099 IRS Forms
Although people talk about the 1099 as one form, it actually encompasses several types:
- Form 1099-INT: Financial institutions file this form if you receive more than $10 in interest from them during the year.
- Form 1099-DIV: If you own securities or stock and receive over $10 in dividends or capital gains, 1099-DIV is filed by the company/financial institution that paid you the dividends.
- Form 1099-MISC: This 1099 is for rent, royalties, and other income over $600 paid out during the year.
- Form 1099-NEC: The 1099-NEC is a new form that reports independent contractor payments over $600 (non-employee compensation) and is often mistaken for the 1099-MISC.
- Form 1099-K: If you own a business that's made more than $600 in transactions after 2021 through a third-party service like Venmo or PayPal, you’ll receive this form from that Merchant Services Provider.
- Form 1099-B: Financial institutions and mutual fund brokers (eg Fidelity, Vanguard, etc.) send out this form when securities like stock, mutual funds, ETFs, PTPs are sold.
- Form 1099-G: This form reports compensation that comes from unemployment, as well as state and local income tax refunds, taxable grants, and agricultural payments.
- Form 1099-R: If you get a distribution from your retirement plan, such as a 401(k) plan, Roth IRA, or IRS, you'll need to file the 1099-R form.
- Form 1099C - This form is for canceled debt
- Form 1099S - Sales of real estate will require this form to be sent out to the seller or entity paid.
- 1099SA - Distributions from HSA’s (Health Savings Accounts)
- RRB/SSA1099 - For railroad benefits or Social Security benefits
The good news is that, regardless of how many types there are, the Internal Revenue Service keeps the due dates for all the 1099 forms pretty consistent.
When Is The Internal Revenue Service Form 1099 Due?
Although it's unlikely that you'll need to deal with most of these forms, 1099 due dates can change depending on whether you're paper filing by mail or filing electronically. That’s why you want to know what forms apply to you.
Form 1099-MISC isn't used for independent contractors anymore. Now, 1099-NEC is used for non-employee compensation such as contract work done for clients. 1099-MISC is only used for the other miscellaneous payments
While the deadline for issuing the 1099-MISC to recipients has consistently been January 31st, the recent inclusion of the 1099-NEC has given businesses who pay non-employees a little leeway. The current deadline for either of these forms is one day later, February 1st. If that date falls on the weekend, then the deadline automatically moves to the next business day. Paper filers must disclose their 1099 to the IRS by March 1st, 2021. It is possible to file a 1099 extension. Just be sure you do it before the due date. If you lost your 1099, there are steps you can take to easily recover it and file.
If you choose to file electronically, you have until the end of February to send the information returns to the IRS. The Form 1099-NEC is due to the IRS and recipients by February 1. January 31 in future years.
The good news is that the other forms listed above, like the 1099-INT or 1099-K, are also due by January 31st. So you don't need to worry about memorizing different due dates. (The IRS also has a due date chart at the bottom of this page.)
What if You Miss the 1099 Due Date?
Unfortunately, the IRS doesn't take too kindly to businesses or people who miss the Form 1099 deadlines. Procrastinating past the January 31st deadline can cost you - especially if you miss the deadline on multiple 1099 forms.
If you're between one or thirty days late, you'll receive a 1099 late filing penalty of $50 per form. If you're more than thirty days late but you manage to file before August 1st, that penalty jumps to $110 per form.
Anytime you file after August 1st, you’ll pay $280 per form. And, if you intentionally disregard to issue 1099s, then you're looking at an expensive $570 penalty per form.
As long as you manage to file your taxes at some point, the maximum penalty will only be $280 per form. Even if it's been months past the 1099 deadline, you're better off filing the late forms rather than hoping the IRS doesn't notice that you never issued them.
Keep in mind that these related fees aren't totals - they are per form. So, if you forget to file fifty or a hundred 1099 forms, you could be looking at thousands of dollars worth of penalties as a taxpayer. The maximum penalties and specific rules can be found here.
Final Thoughts
Unfortunately, the 1099 deadlines are some of the earliest tax due dates that you'll have to deal with. So, when are 1099 due? The short answer is usually January 31st, but it depends on the specific 1099.
While the IRS has extended the deadline from January 31st to February 1st for the 1099-MISC form as a one-off extension, you're better off filing early than trying to accomplish everything at the last minute. Will the IRS catch a missing 1099? Yes, if you forget to file, the IRS will have the records of your income.
There is a huge penalty for not filing 1099 forms and they can quickly add up the longer you don't report your earnings.
And, if you've procrastinated a little too much past the deadline, go ahead and file anyway. You're better off paying up to $280 per form rather than $570.
We want to make sure you never miss a deadline by giving you automated reminders through our awesome tax and accounting app for freelancers. Try out the Bonsai accounting software for 1099 workers to help ensure you never miss another deadline.
FAQs
Still have questions about 1099 deadlines for the tax year? Here's what you need to know.
How Do I Know if an Independent Contractor Needs a Form 1099-NEC?
Depending on how they filed with the IRS, not all independent contractors may need a 1099-form, especially if they file as a C/S corporation including LLCs that've elected to be taxed as corporations. Freelancers who don't file as as a C or S corporation will need a 1099, but the rules can change depending on the type of corporation they file as.
By the end of January, you’ll send a 1099 to each contractor who you paid more than $600. (An in-house employee of a company would receive a Form W-2 versus a 1099).
For single-member LLCs (disregarded entities) or limited liability partnerships, they will need a 1099 form. However, if they're filing as an S-corporation, you don't need to issue a 1099-NEC to them.
You should always get a W9 from your independent contractor to file, which will identify whether they're an LLC, LLP, or an S-corp or another type of entity. They should also provide you with their taxpayer identification number.
What Happens if I File a 1099 for a Contractor That Doesn't Need It?
If you're keeping track of a hundred contractors or more, it's not always easy to remember who needs a 1099 and who doesn't. The good news is that even if you issue a 1099 to a recipient who doesn't need one, the IRS won't penalize you. Those fees are reserved for missing the deadline.
As long as everyone who needs a 1099 gets one by the deadline, you shouldn't face any penalties from the IRS.
Disclaimer: Tax rules frequently change and are highly specific to your situation. Please consult a qualified tax professional for help on filing your tax returns.
What Defines a Verbal Contract?
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
When is a Verbal Agreement Legally Binding?
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
- Offer and acceptance: An offer is made and accepted by another party involved in the agreement;
- Consideration: The involved parties must exchange something of value (money, a service, time, etc), this is known as consideration;
- Intention and certainty: All parties must fully understand the terms of the contract and intend to make a legally binding agreement freely; and
- Capacity: The parties must have the capacity to legally enter into the contract; they're above age and of a stable mindset.
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
How strong is a verbal agreement in court?
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
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get started nowWhen are verbal agreements not enforceable?
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
- The sale of real estate or vehicles
- Real estate leases lasting longer than one year.
- Property transfer following the death of the owner.
- The case of a party agreeing to pay debt for someone else.
- Any contract that requires more than a year to fulfil.
- A contract involving and exceeding a specified amount of money (which varies by state).
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
How are Verbal Contracts Enforced?
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
How can you prove an oral contract?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Written vs Verbal Contracts: What's the Verdict?
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Say hello to digital contracts
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
Benefits of written contracts
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Create Professional Contracts with Bonsai
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?
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