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Year-End Compliance: 1099s & 3921s

Scoping, Deadlines, Prep, and Filing

The 1099 process is a year-end tax compliance procedure that businesses use to report non-employee compensation and other miscellaneous income to the IRS. The process involves identifying independent contractors and vendors who meet specific payment thresholds, verifying their tax information via W-9 forms, and issuing the necessary 1099 tax forms to both the recipients and the IRS by the required filing deadlines to ensure accurate tax reporting and avoid penalties.

The 1099 process follows an annual filing rhythm aligned with federal deadlines. Since this Graphite service is scoped separately from the annual tax SOW, tax clients, as well as non-tax clients, should let Graphite know annually if they need Graphite’s 1099 services.

What the Service Covers

There are almost two dozen 1099 forms. Graphite has standard pricing for the most common 1099s, but if clients need assistance with prep and filing outside of the list, Graphite can discuss requirements and create a customized SOW to support a clients’ specific needs.

The core forms Graphite handles for clients include:

  • 1099-MISC: This form covers miscellaneous payments like rent, prizes, attorney fees, etc.
  • 1099-NEC: This form is used to report payments made to non-employees, such as contractors or freelancers.
  • Form 3921: This form reports exercises of incentive stock options (ISOs) by employees. While sharing identical IRS filing deadlines and processing through the same systems as 1099s, form 3921 is not a 1099 form.

Key Deadlines for Work to Start

To ensure a seamless filing season in January, clients should request 1099 prep work by the last business day of October. Clients need to submit completed documentation (see below) to Graphite by December 31st. This gives the team adequate time to review W-9s, generate preliminary payment reports, handle account reconciliations, and file with the IRS. Graphite cannot guarantee timely 1099 or 3921 filings for any information received after January 22nd.

Steps in the 1099 Process

Data and Documentation from Clients

Once the SOW is signed, prompt transfer of records from the client to Graphite is essential to meet IRS deadlines.

Clients should provide the following documents for 1099 work:

  • W-9s (due to Graphite by December 31st)
    • for all non-employee service providers, outlining legal names, mailing addresses, tax status, and Taxpayer Identification Numbers (TIN/SSN/EIN). Graphite will collect W-9s for clients using our Accounts Payable Services.
    • for the client, verifying the client’s mailing address and TIN. Graphite needs this information to properly file 1099s.
  • Complete payment ledgers for the calendar year categorized by vendor and payment method. Ensure rent, contractor fees, and other eligible payments are reported correctly.

Clients requiring Form 3921 filings should provide the following (typically found in Carta or your detailed cap table.):

  • The date the option was granted
  • The date the option was exercised
  • The exercise price per share
  • The fair market value per share on the exercise date
  • The number of shares transferred
  • EE details for those who exercised options

Please note: Graphite cannot guarantee timely 1099 or 3921 filings for any information received after January 22nd.

Vendor Eligibility & Reconciliation Review

Following the vendor and payments review, Graphite verifies that legal names match the IRS Taxpayer ID numbers. During this process, Graphite will flag missing W-9s, incorrect Social Security numbers/EINs, or missing/incomplete mailing addresses. These items are highlighted as an action item for the client to resolve prior to filing.

Client Approval

Before filing, client authorization is a necessary step. Graphite compiles all reconciled data and sends a 1099 Summary Report to the client for review. Clients will be given a minimum of three business days to authorize the final vendor list and totals, confirming accuracy.

E-filing, Delivery and Deadlines

Once Graphite receives the client’s authorization, it distributes and submits the 1099s. If no approval/authorization is provided, Graphite will send a final notice to the client and move ahead with filing to avoid delays and fees associated with late filings. Graphite sends secure e-delivery links (or paper mail if there is no email available) to contractors on or before January 31, and files Copy A with the IRS and required state agencies.

For clients handling their own 1099 filings or tracking internal compliance timelines, here are key federal due dates:

  • 1099-NEC: Due to recipients and filed with the IRS (paper or electronic) by January 31.
  • 1099-MISC: Due to recipients by January 31 and to the IRS by February 28 (paper) or March 31 (electronic).
  • Form 3921: Due to recipients by January 31 and to the IRS by February 28 (paper) or March 31 (electronic).
  • Please note: If any due date shown above falls on a Saturday, Sunday, or legal holiday in the District of Columbia or where the return is to be filed, the due date is the next business day.