1099s and W-2s: What You Need to Know for 2025
Authored by: Charlie Miracle, CPA – Financial Advisor – Member – Director of CAS
As we approach the end of the year, small business owners should start preparing for one key task: filing 1099s and W-2s. These forms need to be submitted by January 31, 2025, so it’s essential to stay organized and ahead of deadlines.
Understanding 1099s: There are different types of 1099s, and it’s important to know which ones to send to your vendors. The most common forms are 1099-NEC and 1099-MISC:
- 1099-NEC: This form is used to report payments to vendors who provide services to your business. If you’ve paid a vendor $600 or more in a year for services, you’ll need to send them a 1099-NEC. Note that this applies only to services, not products or materials.
- 1099-MISC: This form is primarily for rent payments of $600 or more but can also be used for other payments like prizes or medical payments not covered by other 1099 forms.
Other 1099 forms you may encounter include:
- 1099-INT: For interest payments.
- 1099-DIV: For dividend payments.
- 1099-PATR: For cooperative payments.
Do You Need to Send a 1099?: Not every vendor needs a 1099. If your vendor is a corporation, you typically don’t have to send them one. To ensure you’re collecting the right information, use Form W-9. This form collects key details like name, address, tax ID number, and business entity type. It’s good practice to request a new W-9 from your vendors every year to keep your records up to date.
Filing 1099s Electronically: If you’re filing more than 10 1099 forms, you must file them electronically with the IRS. And remember, all 1099s need to be filed by January 31, 2025. Late filings can result in significant penalties, so don’t let the deadline slip by!
Don’t Forget About W-2s: Along with 1099s, don’t forget to file W-2s for your employees. These forms report wages paid throughout the year and need to be sent to both employees and the Social Security Administration by January 31. As with 1099s, if you’re issuing 10 or more W-2s, you’ll need to file them electronically.
Make sure you have an up-to-date Form W-4 on file for each employee. The W-4 form gathers essential details like name, address, tax ID number, and filing status, which you’ll need to accurately complete the W-2 form. The W-4 was updated a few years ago, and some employees find it confusing. To help with this, you can direct them to the IRS Tax Withholding Estimator on IRS.gov, which will guide them through the process.
Avoid Penalties: The IRS has increased penalties for late filings in recent years, so meeting that January 31 deadline is critical. If you need assistance with filing these forms, don’t hesitate to reach out to Cordell, Neher & Company, PLLC. We’re here to help ensure your business stays compliant with the IRS.
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