The end of the year heralds the beginning of tax season. For insurers and other companies, this involves getting your 1099 paperwork ready. 1099 reporting requirements can be strict, and businesses that fail to comply can face expensive penalties. Here's what insurers need to know.
The IRS1 sets a $600 threshold for 1099 reporting. If your business pays $600 or more to an independent contractor in a year, you must provide a 1099. Reporting is also required in various other situations. For example, payments from businesses to attorneys are reportable, and so are payments for medical and health care services, agent commissions and bonuses, and certain other payment types. Furthermore, when federal income tax is withheld under backup withholding rules, a 1099 is needed regardless of the payment amount.
When 1099 forms are required, they must be filed on time. According to the IRS Tax Calendars2 for 2022, businesses must file 1099 forms for nonemployee compensation paid in 2021 by Jan. 31, 2022. Additionally, 1099 forms for certain other types of payments must be sent to recipients by Jan. 31, 2022 and filed by Feb. 28, 2022.
Filing a form may sound simple, but 1099 reporting involves many opportunities for human error. Here are just a handful of the questions that insurers must ask themselves when complying with 1099 filing requirements.
When insurers fail to meet 1099 reporting requirements, they can face financial penalties as well as reputational damage. To avoid issues, businesses must verify that they have all Taxpayer Identification Numbers (TINs), payment amounts and other pieces of data ahead of the filing deadline, and that all of this information is complete and correct. Businesses must also ensure that they have all resources needed to submit and file forms by the due date.
At this point, you might be wishing for an easier way. Let's face it. The tax code isn't getting any simpler. Fortunately, One Inc 1099 services dramatically simplify 1099 filing and reporting with the following key advantages:
The result is a far less arduous January for your team. To discuss your 1099 reporting and compliance challenges, please call (822) 209-1688 or email firstname.lastname@example.org.Sources: