Independent contractors in Florida have used the 1099 form in the past to record their earnings that don’t directly involve an employer. Between February-March, this form will land in your mailbox, but two other forms may present themselves: the 1099-MISC and the new 1099-NEC. To get a sense of what these are and how to make tax filing easier, follow these tips.
What is an IRS 1099 Form?
Workers who are employed by a company or agency full-time will typically receive a W-2, but if a person other than your employer paid you money, you would use a 1099 form. If you’re ending a contract with someone and don’t expect more work, the payer will fill out a 1099, hand it to you, and send a copy to the IRS. 1099 comes in forms A, B, C, MISC, and NEC.
- 1099-A: Involves canceled debt from a mortgage lender.
- 1099-B: Covers income from sales, some types of bartering, and other income received.
- 1099-C: Includes the total amount of settled credit card debt.
- MISC: Miscellaneous income of at least $600.
- NEC (2020): Covers income from self-employed, freelancing, or side-gig.
A 1099 is further broken down, but most forms may not apply to you. For example, LTC covers long-term care insurance, and G covers money you receive from the government, like a refund.
How to Make the Next Tax Year Easy: Tips and Tricks
Use a Tax Form Generator
Locating and filling out all of your tax forms is a hassle, but you can create a 1099-NEC and other important freelance and independent contractor documents easily online. FormPros specifically creates low-cost documents that won’t require a lawyer to make them legally binding, and the process is 100% private and secure through their use of Norton SSL.
Freelancers and Contractors Must Use NEC for Income, Not MISC
The new 1099-NEC form has replaced the MISC document for freelance and independent contractor income. The IRS noticed the influx of self-employment during COVID-19 and decided to create this document to separate this and other income. You still need the MISC for:
- At least $10 of broker payments or royalties, tax-exempt interest, or dividends.
- $5,000 of consumer products unrelated to a permanent retail establishment.
- At least $600 for:
- Award and prizes
- Crop insurance proceeds
- Health care payments
- Rent
- Fish sold at resale
- Cash from an individual, estate, or partnership
- Attorney Only: Payments from Clients
- Fishermen Only: Proceeds made from a fishing boat
Earnings that don’t fall into those boxes will be placed on the NEC form. The NEC form essentially replaced Box 7 on the MISC form, and most payments on the MISC form are located on Box 3. From 2020 and subsequent years after, you must use NEC for all gig employment.
Even if you earned income below the $10, $5,000, and $600 threshold, you must report it to the IRS. However, you don’t have to pay taxes on that income or receive an NEC copy from a payer.
Submit the 1099-NEC Similarly as the MISC
Gather the total amount you were paid from each payer, as well as their legal name, address, and SSN. Usually, the payer will ask you to fill out a W-9 form, but if you haven’t done this, do so now. That information will be necessary when you’re filling out the 1099-NEC.
Send Copy A to the IRS and Copy B to the payer. You need consent from the payer to send Copy B electronically. Both parties must sign the document as confirmation.
Explore Debt Forgiveness Programs
The IRS has several programs that offer debt forgiveness for individuals with certain types of debt, especially debt related to a home loan. For instance, the IRS offers debt forgiveness programs for people in need of assistance, where they can pay off their debt without incurring penalties or interest. To be eligible for the IRS Debt Forgiveness Program, you must not have enough money to pay all of your due tax balance and pass the financial hardship test. If you think this program is right for you, contact the IRS or a trusted tax professional to learn more.
Important Deadlines for Florida Residents
Deadlines for both copies for Florida residents is on the last day of January every year, but your penalty fees will compound based on your earnings and the amount of 1099 you possess.
- $50 per 1099 if you file within 30 days of the due date
- $110 per 1099 if you file more than 30 days after the due date
- $280 per 1099 after August 1st
An incorrect statement will cost you $560 per 1099, and there is no maximum penalty amount.
