Key Takeaways
- Form 1099-NEC: non-employee compensation ≥$600. Due Jan 31.
- Form 1099-MISC: rent ≥$600, royalties ≥$10.
- Form 1099-K (Tax Year 2024): $5,000 threshold (transitional).
- Backup withholding: 24% if no TIN provided.
- Attorney payments: report on 1099-NEC even if incorporated.
- Penalties: up to $660/return for intentional disregard.
Last updated: January 2026
Form 1099 Reporting Requirements
Why This Matters for the Exam
1099 reporting is compliance-focused. Know the thresholds, form types, and backup withholding rules.
Expect at least 3-4 questions on 1099 reporting.
Form 1099-NEC (Non-Employee Compensation)
| Element | Rule |
|---|---|
| Threshold | $600 or more |
| Who receives | Independent contractors, freelancers |
| Due date | January 31 |
| Attorney rule | Report even if incorporated |
Form 1099-MISC
| Payment Type | Threshold |
|---|---|
| Rent | $600 |
| Royalties | $10 |
| Prizes/Awards | $600 |
| Medical/Health payments | $600 |
Form 1099-K (Third-Party Payments)
| Tax Year | Threshold | Transactions |
|---|---|---|
| 2023 | $20,000 | >200 |
| Tax Year 2024 | $5,000 | Any |
| 2025+ | $20,000 | >200 |
Backup Withholding
| Rule | Description |
|---|---|
| Rate | 24% |
| Triggers | No TIN, incorrect TIN, IRS notice |
| Payer liability | Payer liable if fails to withhold |
Penalty Structure (2024)
| Timing | Penalty per Return |
|---|---|
| Within 30 days | ~$60 |
| After 30 days, before Aug 1 | ~$120 |
| After Aug 1 | ~$330 |
| Intentional disregard | $660 (no maximum) |
1099-NEC vs. 1099-MISC
| Payment | Form |
|---|---|
| Contractor services | 1099-NEC |
| Rent to landlord | 1099-MISC |
| Royalties | 1099-MISC |
| Legal settlements (attorney fee unknown) | 1099-MISC Box 10 |
Real-World Scenario
Scenario: Company hires plumber for $2,000. Plumber won't provide SSN.
- Backup withholding: 24% × $2,000 = $480.
- Company withholds: $480 and remits to IRS.
- Plumber receives: $1,520.
- If company doesn't withhold: Company liable for $480.
On the Exam
Expect 3-4 questions on 1099, typically:
- Form Questions: "Which 1099 for contractor payments?"
- Threshold Questions: "What is the 1099-K threshold?"
- Backup Questions: "What is the backup withholding rate?"
The key is to remember: 1099-NEC = contractor $600+. 1099-MISC = rent $600+, royalties $10+. 1099-K (Tax Year 2024) = $5,000. Backup = 24%. Attorneys = report even if incorporated.
Test Your Knowledge
$800 to consultant, $500 rent to landlord. Forms required?
A
B
C
D
Test Your Knowledge
Tax Year 2024 1099-K threshold?
A
B
C
D
Test Your Knowledge
Payee fails to provide TIN. Backup withholding rate?
A
B
C
D