What is a 1099 form? How do I know if my employees should fill out a 1099 Form? We'll walk you through everything you need to know to keep your practice HR compliant.
What Is a 1099 Form?
Form 1099 is a tax form used to report income paid by someone other than an employer. This form is required when paying out any money that is not considered part of your wages, salary, or tips.
The most common form is Form 1099-NEC, previously known as Form 1099-MISC. This form is used for nonemployee compensation, including those who are self-employed or work as independent contractors. It is also used for income that doesn’t fit into other 1099 categories, such as awards, prizes, or royalties.
What Is the Purpose of 1099 Forms?
The main purpose of a 1099 form is to verify whether there are discrepancies between the value someone reports on their tax return and the income shown on their records. These forms are given to anyone who received income outside of their regular pay from an employer.
Who Gets a 1099 Form?
When an individual works for a company, they receive Form W-2 that summarizes their earnings for that year. Any income that’s made outside of those earnings should be reported using a 1099 form. However, just because you receive a 1099 form does not mean you’ll owe taxes on that amount. An example of this that’s common within the healthcare industry is HSA distributions used to pay for qualified health and medical expenses.
There are several 1099 forms and the form sent out will depend on the type of income that was made. In the healthcare industry, the most common 1099 form filed is 1099-NEC, as discussed above. This form must be given to both businesses and individuals you paid more than $600 to throughout the calendar year.
For example, a subcontractor who renovated your practice, a building owner to who you paid rental expenses to, a dental lab you paid to complete necessary services, or an attorney that prepared legal paperwork for your practice.
Bottom line: If you paid an unincorporated business or person more than $600 in the previous calendar year, you will need to provide a 1099-NEC form. This applies to both practice owners and those who paid for certain health-related services. For example, farmers paying veterinarians for services that exceed $600 during the year.
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A common example of misclassification is within the dental industry. However, this also applies to other practices. Some dentist employers misclassify dentist hygienists as contractors, sending them a 1099 form. This is most commonly seen when a temporary hygienist comes in to help with a heavy schedule or fill in for a regular, full-time hygienist. This is catching the attention of the IRS and is worth mentioning.
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Where Do I Get 1099 Forms?
You cannot simply print a blank 1099 form. These forms need to be issued and can be obtained:
- By ordering the correct 1099 form directly from the IRS
- By picking up a physical copy from an office supply store
- By using a third-party service that creates 1099 forms for you
- By using third-party tax software for your business
Did you know that we at HR for Health monitor all the specific laws and regulations that affect your practice? If you have questions about compliance issues, please reach out to us. Schedule a call, call (877) 779-4747, or email firstname.lastname@example.org now to learn more.
HR for Health is one of the nation’s leading Human Resources Management Systems (HRMS) used by small to mid-sized practices.
Quick note: This is not to be taken as legal or HR advice. Since employment laws change over time and can vary by location and industry, consult a lawyer or HR expert for specific guidance. Learn about HR for Health's HR services.