1. How did you pay the vendor?
A. Credit card, debit card, PayPal, or similar third-party payment platform
No 1099 needed from you, since the payment processor handles reporting via Form 1099-K (assuming they meet reporting thresholds). You can stop here.
B. Cash, check, direct bank transfer, or other direct payment method
Continue to Question 2 to see if you need to file 1099-NEC or 1099-MISC.
2. Did you pay $600 or more in total to this person or business during the year?
A. Yes → Go to Question 3.
B. No → No 1099 is required (no further questions needed).
3. What type of entity is the payee?
A. An individual, sole proprietorship, or LLC taxed as sole prop/partnership → Go to Question 4.
B. A partnership (non-LLC) → Go to Question 4.
C. A corporation (C-Corp or S-Corp) → Typically no 1099 is required unless the payment is for attorney fees or certain medical/healthcare payments. Check for exceptions; if none apply, you’re done.
D. Unknown → Request or review their Form W-9 to confirm. Then resume the quiz.
(Note: If the payee is your employee, they get a W-2, not a 1099.)
4. What did you pay them for?
Services (nonemployee compensation—e.g., consulting, freelance, repairs)
Go to Question 5.
Rent (e.g., office rent, equipment, land)
That’s reported on Form 1099-MISC (Box 1) if the payee is not a corporation. If the landlord is a C-Corp or S-Corp, no 1099 needed (generally).
Royalties of $10 or more
That’s Form 1099-MISC (Box 2).
Prizes, awards, or other taxable income (non-wage)
That’s Form 1099-MISC (Box 3) if $600 or more.
Attorney fees or legal settlements
Attorney fees (for services rendered): Form 1099-NEC.
Gross proceeds paid to attorneys (e.g., settlement funds): Form 1099-MISC (Box 10).
None of these or unsure → Check IRS instructions or consult a tax pro.
5. For services ($600 or more) to a non-corporate payee…
You generally file Form 1099-NEC (Nonemployee Compensation).
(Example: An LLC taxed as a partnership performing plumbing, consulting, or graphic design services.)
Summary of Outcomes
No 1099 if Paid by Credit/Debit Card or Third-Party Processor
Those entities issue Form 1099-K if thresholds are met.
No 1099 if Under $600
Payments under $600 total for the year are not reportable.
Form 1099-NEC
$600 or more
Paid for services
To an individual, sole prop, or partnership/LLC taxed as such
Not your employee
Form 1099-MISC
Rent of $600 or more (Box 1)
Royalties of $10 or more (Box 2)
Other income (prizes, awards, etc.) of $600 or more (Box 3)
Attorney gross proceeds (Box 10)
Payment not made by credit/debit card (otherwise 1099-K)
Check the Payee’s Entity Type
If they’re a C-Corp or S-Corp, you generally do not file 1099, except for certain payments (legal, medical).
Final Notes
Always obtain a W-9 from vendors so you know their business structure and TIN.
Deadlines: 1099-NEC must be filed by January 31; 1099-MISC typically due to recipients by January 31 and to the IRS by February 28 (paper) or March 31 (e-file), unless you reported NEC (which now belongs on 1099-NEC).
Keep Good Records of each vendor’s payment method to avoid double-reporting or missing a 1099 entirely. If in doubt, consult the IRS instructions or a tax professional for clarity.
If you have any questions or need personalized help, don’t hesitate to reach out. Schedule a call with Jacob by going to https://www.jacobcurtiscpa.com/7-shopify-mistakes-calendar. We're here to help you piece together financial freedom.
Opmerkingen