![]() This form is used to record payments for a variety of miscellaneous things. Once you know which contractors you paid over $600 to, you will need to fill out Form 1099-NEC. Payments for royalties must be shown for any paid over $10. Review it for any non-corporate vendors and lawyers that were paid over $600. If you had designated your vendors as potential 1099 contractors when you set them up, these reports would show you which vendors were paid more than $600 during the year.įor any accounting system, run a report on purchases by vendor. If you have an automated system like QuickBooks or QuickBooks Online, there are 1099 Summary and 1099 Detail reports. If the service provider's business is incorporated, you do not need to send them a 1099-NEC. How do I know which contractors need to receive Form 1099 this year? The nursery attendant must work when the children are there. However, nursery workers and secretaries must be treated as employees as they do not have the right to control or direct the work. ![]() The gardener who uses his own equipment and is paid to keep the cemetery mowed and clear of branches may be treated as an independent contractor, as can the plumber who comes in for a particular problem. If the bookkeeper is required to come in for a specified number of hours each week determined by the director and is given detailed instructions on how to do the bookkeeping, he may be considered an employee. If he has other clients, controls when the work will be done, and gives the client the results (i.e., monthly financial statements), it is pretty clear he is an independent contractor. Contractor or Employee?Ī bookkeeper comes to the organization once a week to do the bookkeeping. If the executive director can tell the contractor exactly how to do the job and when they must work on it, the contractor will be considered an employee. ![]() The critical passage above is if the payer (the organization) can control or direct ONLY the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. However, whether these people are independent contractors or employees depends on the facts in each case. People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. An independent contractor is a little less clear. The IRS assumes individuals working for an organization are employees unless it is proven otherwise. You probably already understand what an employee is. How do I determine who are Independent Contractors? The $600 also includes any parts or materials the contractor billed you for. ![]() An independent contractor is someone who is not your employee and has been paid over $600 throughout the year. The IRS recognizes as non-employee compensation monies paid for services performed by Independent Contractors. How can I get free 1099s? What is Non-employee Compensation? What else needs to be sent with the 1099s? ![]() What do I do to my chart of accounts for the 1099 changes? Starting in 2020, the IRS now requires payments to independent contractors are shown on a new form 1099-NEC (non-employee compensation) instead of the 1099-MISC (miscellaneous). The 1099-Misc listed royalties, rents, and other miscellaneous items, but its most common use was for payments to independent contractors. In past years, if your organization paid a person for services who was NOT an employee, you may have needed to file a 1099-Misc for the total amount given over the year. Along with all the other changes we have dealt with in 2020, the IRS has also changed how organizations report the money paid to independent contractors, or as they prefer to label it, Non-employee Compensation. ![]()
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