The 2025 deadline for 1099 forms is fast approaching. Due to the new rules for the 2024 tax year, more businesses than ever will need to complete them. 

If your business is affected, you’ll need to be aware of the deadline. For 1099-NEC forms, the deadline is January 31, 2025. The majority of other 1099 forms must be completed by February 28 if filing by paper and March 31 if filing electronically. 

But that’s not all you need to do to remain compliant. Read on to find out more.

Table of Contents:

• When is a 1099 Form Appropriate?
• Types of 1099 Tax Forms
• 1099 vs. W-2 vs. W-9
• Consequences of Missing the 1099 Deadline in 2025
• New Filing Requirements
• How to Keep Track of Accounting Deadlines & Project Management

When is a 1099 Form Appropriate?

You need to use a 1099 form when reporting payments to any non-employees. A non-employee would be someone like a freelancer or an independent contractor, but also companies providing services to you. For instance, a freelancer providing marketing content or a company providing the catering for a board meeting. 

For the 2024 tax year, you must issue these forms to those who fall under this remit, if you pay them $600 or more during the tax year for any services. However, you also need to issue a 1099 form if you pay non-employees for royalties and a number of other income categories, which we discuss below. 

Types of 1099 Tax Forms

There are several types of 1099 form. While that can be confusing to non-experts, it's important to use the right ones when filing your taxes - something an interim CFO consulting firm could help with. 

Each different 1099 reports the various specific types of income paid to non-employees. It’s the IRS’s way of capturing all individuals and businesses who fall into this category. Arguably, however, the most common types are the 1099-NEC and the 1099-MISC. 

Here are what they are used for: 

1099-NEC

This form is specifically for when you need to report a payment(s) of $600 or more to non-employees for their services during a tax year. It is used for freelancers, independent contractors and entities who perform services for you, but are not employees. 

1099-MISC

The 1099-MISC form is different from the 1099-NEC as it is used for reporting miscellaneous income. That means payments such as rent, royalties, or payments to healthcare providers, for example. The payments need to reach $600 or more in:

• Rents
• Prizes and awards
• Other income payments
• Medical and health care payments
• Generally, the cash paid from a notional principal contract to an individual, partnership, or estate
• Payments to an attorney
• Any fishing boat proceeds
• Crop insurance proceeds
• Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish

However, it also needs to be completed for each person to whom you have paid at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest in the tax year. Furthermore, you need to complete a 1099-MISC form to report making any direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a physical shop. 

There are many other types of 1099 form. Here are some examples: 

• 1099-A: This form is when you need to report the acquisition or abandonment of secured property - for instance a foreclosure.
• 1099-B: Any proceeds from broker and barter exchange transactions need to be reported with the 1099-B form. 
• 1099-DIV: The form 1099-DIV is for reporting dividends and distributions received from investments. 
• 1099-INT: This 1099 form is for reporting interest income that is earned from financial accounts - for instance a savings account. 
• 1099-K: This form is for payments received through credit card transactions or third-party networks. It will apply to businesses and gig workers. 
• 1099-R: Form 1099-R reports distributions that are received from pensions, annuities, retirement or profit-sharing plans, and insurance contracts.
• 1099-S: A 1099-S form is required for reporting the proceeds from real estate transactions such as a property sale. 

1099 vs. W-2 vs. W-9

No discussion about the 1099 forms would be complete without also referencing the W-2 and W-9 forms. 

The main difference between the forms is that the 1099 reports payments made to contractors for the services they provide, while the W-9 form collects information on those contractors. The W-2 is a form issued to employees. It reports wages and taxes that are withheld throughout the year. They exist to ensure the accuracy of tax reporting. 

Let’s explore the W-2 and W-9 in more detail:

W-2

This form is for employees. It’s issued to them by you and it reports their annual wages as well as the total of the taxes withheld throughout the year. Other details will be included in it, such as Social Security numbers, Medicare, total income, and any federal income tax withholdings. 

These forms are used as they show the earnings of employees who automatically have their tax deducted by you. You need to send these forms to your employees by January 31 each year as it means your employees can then file their taxes correctly. 

W-9

You need to complete a W-9 form to be able to submit a 1099 form. That’s because the information provided on the W-9 is what you (or your finance department) use to prepare each non-employee’s 1099. The information included are details such as name, address, and Taxpayer Identification Number (TIN) etc. You don’t need to file the W-9 with the 1099, but you should keep it on file. It’s a good idea to give it to a non-employee when you begin working with them. 

Consequences of Missing the 1099 Deadline in 2025

While submitting the right tax documentation to the IRS can be complex and, at times, overwhelming, the consequences of inaccurate reporting means it is essential to get it right. In fact, the consequences of missing a deadline make it more than worthwhile to submit your paperwork on time. 

There are a number of issues that will arise if you miss the 1099 deadline in 2025. They are: 

• Financial penalties
• The knock-on effect of financial penalties
• Reputational damage

8020 Consulting offers interim financial management, which can help ensure that your IRS filings are not only correct, but also punctual. We can help take the stress out of staying tax-compliant. 

Let’s explore the consequences of missing the 1099 deadline in 2025 in more detail: 

Financial Penalties

You’ll have to pay a fine if you file your 1099 forms late. The current 2024 guidance is:

• if you file up to 30 days late, the fine will be $60. 
• if you file 31 days late and then through to August 1st, you’ll have to pay $120. 
• if you file after August 1st, that penalty shoots up to $310. 
• finally, intentional disregard will cost you $630.

However, the maximum penalty can actually vary for small and large businesses. No cap exists for penalties due to intentional disregard.

Furthermore, the IRS charges interest on penalties. The date they begin charging interest varies according to the penalty type and amount. The interest you incur will continue to go up until you pay off the balance in full. 

The Knock-On Effect of Financial Penalties

Not submitting the forms on time can add up to a material amount, especially if you consider that it is levied on every single form you filed late. With interest added, you could be in danger of a sky high tax bill. You could thus be putting your company under unnecessary financial strain - as well as causing yourself undue stress too. 

Reputational Damage

The slur of not being tax compliant can harm your company’s reputation. The cost of reputational damage is difficult to calculate, but it's hard to repair the damage once done. As a result, you could find your bottom line is impacted negatively if customers or clients go elsewhere. 

New Filing Requirements

New tax years often bring about changes to the current system. When it comes to the 1099 form, businesses which file 10 (or more) of these forms (of any type), need to submit them electronically for the tax year 2024. From the IRS’s point of view, electronic submission should streamline tax reporting. Businesses may be subject to a penalty if they don’t comply. 

How to Keep Track of Accounting Deadlines & Project Management

Completing forms for the IRS can be extremely complex. What can exacerbate the situation is keeping track of all the accounting deadlines which affect you. Even more frustrating can be the constant changes to tax submission requirements. All this quickly adds up to an onerous burden for your business. 

To simplify the process and help support compliance, we suggest following these steps: 

• Update your calendar at the start of each year
• Set up automated reminders for tax filings
• Consider investing in financial consulting & accounting services

Let’s further examine those ideas: 

Update your calendar at the start of each year

When you return to the office after the holidays, it’s a good idea to update your calendar with the key dates for the upcoming year. So make sure you diarise key accounting and tax deadlines. Look up when you must submit forms such as your 1099s, W-2s, and other filings to keep you tax compliant. Once you have an overview of when these dates are, you can make sure that you have resourced the time properly. 

Set up automated reminders for tax filings

When you’re scheduling your deadlines, it can be a huge help to set up automated reminders prior to when they need to be filed. That way, you won’t be scrambling to complete your submissions at the eleventh hour. When left to the last minute, you expose yourself to making errors, and thereby increasing the risk of penalties. Set reminders before the deadline, with enough time to complete your forms - and check them, too. 

Consider investing in financial consulting & accounting services

Finally, outsourcing to financial consultants is a great way of leveraging in depth expertise outside of your company. Tax filings are extremely complicated and keeping up to date with them is tough. Hiring a financial consulting firm to execute your annual taxes provides you with expert guidance to ensure the accuracy of your tax reporting - and reduces your stress too. 

Manage Deadlines & Stay On Track with 8020 Consulting

There is no doubt that submitting your taxes is a difficult, onerous task. The forms required are complex and the various deadlines can be difficult to track. That’s why employing an outside firm, specializing in tax accounting, can be such a huge help - freeing you up to spend time on developing and growing your business. 

Don’t let tax season stress you out - contact 8020 Consulting today to see how we can help your business achieve its financial goals.

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