By now, you may know that individuals you hire to do various jobs at your barn such as training, grooming, mucking out, etc. need to be categorized as either an employee or 1099 contractor, but did you know that -  in many cases -  you are required by law to track, create, and file 1099-NECs for other individuals providing you services such as the vet, farrier, landscaper, etc.?

Right now, you may be having a moment of panic. Deep breath - It's going to be ok, better late than never!

Here are some answers to many commonly asked questions surrounding 1099-NECs.

What is a 1099-NEC?

A 1099-NEC is a short report that you send to the IRS informing them of each vendor you paid over $600 for services received throughout prior year. These are due January 31st.

Additionally, you create a 1099-NEC that you hand over to the vendor so they can also keep track of income they need to report to the IRS.

Who Needs a 1099-NEC?

Anyone who provides you services (not products) that you pay over $600 (via cash, check, ACH or the like) throughout the year. There are some exceptions here. If the individual / business is an S-corp or incorporated, you do not need to provide them with a 1099-NEC at year end. If payments were made via credit / debit card / Paypal or similar then no 1099-NEC is required.

How do I know if they are an S-Corp or Incorporated?

Throughout the year, you should be keeping track of (via good bookkeeping) who you pay for services (and how much) to anticipate who will reach this $600 threshold. When you decide it's possible they will reach this threshold during the year, you need to have them fill out a W-9 which is used to gather information such as business name (this can also be an individual - not a business), tax ID number, etc. in order for you to go online to the IRS's website (or have your bookkeeper or CPA do this) and verify their tax ID matches their name (called a TIN match). This is in effort to have everything ready to roll come year-end when you need to file the 1099-NEC.

Now if this W-9 indicates that they are incorporated or an S-corp, then you need not file a 1099-NEC for this vendor.

What's an easy way to keep track of this?

I first recommend having good bookkeeping records so you can easily keep track of which vendors you should start asking for W-9s from throughout the year. It is important to try to keep up with this all year long so that you do not end up in a time crunch at year end. If you wait until the end of the year when everyone is busy, you run the risk of your vendor's not answering you and causing you to miss the filing deadline.

The IRS imposes strict penalties and fines for any business who fails to comply with 1099-NEC filings and also for any vendor who refuses to provide their information to be reported.

Please remember that you have to make at least several attempts over the span of a reasonable time period to procure a completed W-9 from a vendor before reporting them as non-compliant.

In order to make this decision easier, I've created an easy to follow Form 1099-NEC Decision GUIDE! This is yours to download for FREE!

Download the 1099-NEC Decision Guide HERE!

How do I file 1099-NECs?

I like to recommend Track1099 (now called Avalara 1099 & W-9) to perform TIN matches on W-9s and to file the 1099-NECs. It's a simple system that also has instructional videos to show you how to perform each step.

All these services are offered at extremely affordable rates per 1099 filed as you can see HERE.

You can also fill out paper versions of the 1099-NEC by going to the IRS Website. They also have step by step instructions to help you complete the report.

Important Notes

Please take note that these are general guidelines for typical service-based equine industry vendors. In other industries such as legal and real estate, there other factors to take into consideration when making the 1099-NEC determination. I always recommend chatting with a professional regarding your specific situation if this is your first time filing 1099-NECs for vendors.