14.6 Form 1099 Reporting Requirements
Key Takeaways
- Form 1099-NEC: non-employee compensation ≥$600. Due Jan 31.
- Form 1099-MISC: rent ≥$600, royalties ≥$10. Due Feb 28 (paper) / Mar 31 (electronic).
- Form 1099-K (Tax Year 2025): $20,000 + 200 transactions — OBBBA permanently reset the threshold (rolling back the $600/no-transaction-floor schedule).
- Backup withholding: 24% if no TIN provided.
- Attorney payments: report on 1099-NEC even if incorporated.
- Penalties: $60/$130/$340 per return depending on lateness; $680/return for intentional disregard (2025).
Why This Matters for the Exam
1099 reporting is compliance-focused. Know the thresholds, form types, and backup withholding rules. OBBBA permanently reset the 1099-K threshold back to $20,000 + 200 transactions, rolling back the planned step-down to $600 with no transaction floor.
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 Payment Networks) — OBBBA Reset
| Tax Year | Threshold | Transactions | Notes |
|---|---|---|---|
| 2023 | $20,000 | >200 | Pre-IRS-delay |
| 2024 | $5,000 | Any | IRS transitional notice |
| Tax Year 2025 | $20,000 | >200 | OBBBA permanently reset |
| 2026+ | $20,000 | >200 | OBBBA permanent |
OBBBA repealed the American Rescue Plan Act's $600 threshold and restored the pre-2022 $20,000-and-200-transactions rule on a permanent basis, effective 2025.
Backup Withholding
| Rule | Description |
|---|---|
| Rate | 24% |
| Triggers | No TIN, incorrect TIN, IRS notice |
| Payer liability | Payer liable if fails to withhold |
Penalty Structure (Tax Year 2025)
| Timing | Penalty per Return |
|---|---|
| Within 30 days | $60 |
| After 30 days, before Aug 1 | $130 |
| After Aug 1 | $340 |
| Intentional disregard | $680 (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 (2025)
Scenario: Company hires plumber in 2025 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 2025 1099-K threshold?" ($20,000 + 200 transactions — OBBBA reset)
- 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 (2025) = $20,000 + 200 transactions (OBBBA permanent reset). Backup = 24%. Attorneys = report even if incorporated.
$800 to consultant, $500 rent to landlord. Forms required?
Tax Year 2025 1099-K threshold (after OBBBA)?
Payee fails to provide TIN. Backup withholding rate?