As you prepare for the 1099 filing season, note the changes effective for the 2024 tax year:

• Form 1099-NEC: Beginning in year 2022 and forward, the IRS released a continuous-use format version of Form 1099-NEC to be used. Forms are no longer year specific. 
• Threshold for Form 1099-K: Beginning in 2024, The American Rescue Plan Act of 2021 (ARPA) changed the Form 1099-K minimum threshold requirement for reporting payments from online sellers and third-party platforms, such as Venmo and PayPal. The IRS postponed the 1099-K threshold of $600 and phase-in rules were applied for tax years 2022 and 2023. The filing requirement for these years was to send 1099-Ks to merchants when the total number of transactions exceeded 200 and the gross amount of reportable payments exceeded $20,000 in a calendar year. As part of the phase-in transition, starting in the 2024 tax year, the 1099-K reporting threshold has been reduced. The threshold is now set at gross amount of reportable payments of $5,000 or more with no restriction relating to the number of transactions for tax year 2024. The threshold is slated to decrease to $600 for tax year 2025. 
• New online portal: The IRS launched a free online portal, IRIS, for small- to mid-size businesses to file Forms 1099 for tax years 2022 and later. Enrollment is required for the IRIS platform and usually takes up to 45 days for the IRS to issue you a Transmitter Control Code. As of January 2024, you are no longer able to electronically file using your legacy transmitter code using the FIRE system. 
• Effective for returns required to be filed on or after Jan. 1, 2024 (2023 year-end), you must file Forms 1099  electronically if you have 10 or more information returns (down from 250). Learn more in the “Electronic filing requirement update” section below.
• Many states participate in the Combined Federal/State Filing Program. The IRS will automatically forward 1099 information to participating states, eliminating the need to file separately with these states. Refer to state 1099 filing requirements to understand your state’s requirements.

Read on for additional important information and deadlines.

Employer requirements

Form 1099-NEC

• Report payments of $600 or more made to nonemployee service providers, such as independent contractors, consultants, accountants, cleaning professionals, landscapers, and other self-employed individuals, as well as nonincorporated entities, which includes any partnership, limited liability company (LLCs), limited partnership (LP), or estate. This also includes professional fees paid to attorneys (including law firms established as corporations).
• Report backup withholding.
• Payments to attorneys of $600 or more paid in the course of a trade or business are reportable in box 1 of Form 1099-NEC. Learn more in the “Gross proceeds paid to attorneys” section below. 

Form 1099-MISC

Report all other types of miscellaneous compensation paid in the amount of $600 or more made in your ordinary course of trade or business, such as rents, prizes and awards, certain medical and healthcare payments, and other income, as well as royalties paid over $10.

Gross proceeds paid to attorneys

Under section 6045(f), report in box 10 payments that:

• Are made to an attorney in the course of your trade or business in connection with legal services, but not for the attorney’s services, for example, as in a settlement agreement;
• Total $600 or more; and
• Are not reportable by you in box 1 of Form 1099-NEC.

Electronic filing requirement update

The IRS has released final regulations mandating that businesses that file 10 or more returns in a calendar year – previously more than 250 – must file electronically effective for returns required to be filed on or after Jan. 1, 2024. Paper filing is no longer an option. Filers must aggregate almost all return types covered by the regulation to determine whether they meet the 10-return filing threshold. (This includes such forms as W-2s, 1099s, and other business return types.)

Extensions

While the IRS allows an automatic 30-day extension for certain Forms 1099, there are very limited circumstances for requesting an extension for Forms W-2 and 1099-NEC. You can use Form 8809 for filing an extension if you qualify. Contact your CohnReznick engagement team or other trusted tax advisor with any questions. 

Penalties

Failure to comply with the various filing deadlines and requirements may expose a business to the following significant penalties:

• Failure to file the correct information returns or furnish the correct payee statements by the due date:
  • Small businesses (average annual gross receipts of $5 million or less for the most recent three taxable years): $60-$330 per recipient, depending on when you file/furnish, with a maximum penalty of $1,329,000 per year.
  • Large businesses (average annual gross receipts of more than $5 million): $60-$330 per recipient up to a maximum of $3,987,000 per year
• For failure to provide a correct information return or payee statement due to intentional disregard, the penalty is at least $660 per Form 1099 or statement with no maximum penalty.

If you have received Form 1099 non-matching notices from the IRS, be vigilant and follow up with your vendors or you may be penalized for the maximum amount per incorrectly filed recipient.

2025 due date summary chart

_{*The due date for submitting to the IRS is the same as for providing it to the recipient, regardless of whether filing by paper or electronically
**Submission to the IRS if filing by paper is February 28, 2025}

Important calendar reminder

To timely prepare and e-file your forms, provide your data to your tax team by Jan. 15, 2025.