If there's one thing I've learned in providing bookkeeping and tax services to Realtors over the past 15 years, it's that the only thing that's constant is change!
Whether you are…
- a real estate broker who paid agent commissions in 2020, or
- an agent who paid a virtual assistant last year
… there are new rules when it comes to filing 1099s in January.
Here’s the rules for 2021:
- Realtors no longer send 1099-MISC forms in these situations. Instead they file the new 1099-NEC form.
- Who must file? If you paid any individual a total of $600 or more during the year, you are required to file the new 1099 NEC.
- The filing deadline for the new 1099 NEC is Jan 31, 2021
Now before you call your accountant, or run down to Office Depot to buy 1099-NEC forms, you need to be aware of a couple exceptions to the 1099 filing rules:
Exception 1: If you paid the contractor electronically (e.g., PayPal, bank debit card, Venmo, Apple Pay) as opposed to paying by cash or check, you are no longer required to file a 1099.
Exception 2: if the contractor is incorporated (C Corp or S Corp), you are not required to file a 1099. You find out whether the contractor is incorporated by requesting a Form W-9 from the contractor. (Note: you must determine from the W-9 form the contractors tax status (C Corp, S Corp), not legal status (LLC, Corp).
New 1099 Form versus the Old
Real estate brokers and agents should quickly familiarize themselves with the new1099-NEC (preview here). This is a new form specifically for reporting non-employee compensation—currently defined as payments to individuals not on payroll on a contract basis to complete a project or assignment. This would include real estate agents, virtual assistants, cleaning services, remodelers, and other self employed contractors
The old 1099-MISC form is still around, it’s just used to report miscellaneous income such as rent or payments to an attorney. And the new deadline for the old 1099-MISC form is March 1, 2021.
If you have questions or need assistance filing 1099s for your contractor payments in 2020, contact me at 75-312-0098 or firstname.lastname@example.org.
Jim Flauaus, EA