When businesses report with various 1099 forms, it helps the IRS understand the payments made by one party and payments received as income by other parties through such payments.

Let’s assume that your entity has made a payment of $750 to a landscaper, then such a payment is seen as a payment from your association’s perspective and income from the recipient’s perspective. While payments may help reduce the tax burden for your association, receipt of income increases the tax burden for the recipient/vendor.

What is form 1099-Misc and when should it be used?

Form 1099-MISC is a 1099 that specifically deals with miscellaneous information in a tax year. Payments, such as rents, royalties, cash payments for fish, payments for healthcare expenses, crop insurance proceeds, and other miscellaneous payments totaling $600 or more are reported on this return. Your association is less likely to use this type of form.

What is form 1099-NEC and when should it be used?

Form 1099-NEC, too, is a 1099 federal return that exclusively deals with non-employee compensations paid in a tax year. Payments made to independent contractors totaling $600 or more must be reported in this return. Independent contractors can be vendors, freelancers, self-employed individuals, and small business owners. This is the 1099 form type that your association would be most likely to use and send out to your vendors. File Form 1099-NEC for each independent contractor or payee to whom you’ve paid at least $600 or more as non-employee compensations.