A Quick Guide to 1099s for Therapists

Written By Sara Walls

As we head into tax season, it’s important to stay on top of deadlines and requirements. One of the first deadlines for tax season is for 1099 forms. Here’s a brief intro to help get you started:

What Are 1099s?

A 1099 form is an informational tax form that reports certain types of non-employee income to the IRS. Here’s when you may need to file one:

  • 1099-NEC (Non-Employee Compensation): If you used cash, check, bank transfer, or Zelle to pay a contractor, freelancer, or vendor $600 or more during the year for services (not goods).

  • 1099-MISC (Miscellaneous Income): If you paid $600 or more for rents, prizes, awards, or other miscellaneous payments.

Why It Matters
Filing 1099s ensures compliance with tax laws and helps both you and your contractors/vendors report income accurately. There is a question on your tax return where you must note that you have issued all 1099s required of you. Penalties for willful non-filing are a minimum of $660 per form.

Key Deadlines

  1. January 31, 2025

    • 1099-NEC forms must be sent to recipients (contractors/vendors) and filed with the IRS by this date.

    • 1099-MISC forms (if already filed) or a payee statement must be sent to recipients (contractors/vendors) by this date.

  2. February 28, 2025 (or March 31, 2025, for electronic filing)

    • 1099-MISC forms must be filed with the IRS by the above dates if you’re reporting miscellaneous payments such as rents.

Common Scenarios

1099-NEC

You’ll likely need to file a 1099-NEC if:

  • You paid $600 or more to a contractor or freelancer in the year.

  • The payment was for services, not products or goods.

  • Examples include contracted therapists, virtual assistants, social media managers, bookkeepers, accountants, attorneys, consultants, or coaches.

  • The recipient is not a corporation (most LLCs and sole proprietors require 1099s). Attorneys and law firms are an exception to this rule - even if they are a corporation, you need to file.

  • Payments were made via cash, check, Zelle, or bank transfer (not through credit cards or third-party platforms like PayPal, which may issue its own 1099-K).

1099-MISC

You may need to file a 1099-MISC if:

  • You paid $600 or more in rents to a property owner or another therapist as a sublease.

  • The recipient is not a corporation (most LLCs and sole proprietors require 1099s). Attorneys and law firms are an exception to this rule - even if they are a corporation, you need to file.

  • Payments were made via cash, check, Zelle, or bank transfer (not through credit cards or third-party platforms like PayPal, which may issue its own 1099-K).

This is not an exhaustive list of scenarios. Please consult with your tax preparer to discuss your individual situation. For more information, see this blog post from Simple Profit’s Jennie Schottmiller, LMFT, CPA and the IRS website.

Steps to File

  1. Gather contractor/vendor or landlord details using Form W-9 (Request for Taxpayer Identification Number).

  2. Use the correct 1099 form:

    • 1099-NEC: For non-employee compensation.

    • 1099-MISC: For miscellaneous payments such as rents or prizes.

  3. File the 1099 forms with the IRS and provide copies to your recipients.

    • The easiest way to file is through your tax preparer. You can also electronically file with popular tools like Avalara and Tax1099, or file by mail if you are filing less than 10 forms. The IRS has a new free direct filing tool called IRIS, but it does first require obtaining a code, which can take some time. You can start the process and find out more here.

Helpful Resources

Tax season can be a lot, but with the right support, you can make it through!

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Last updated January 20, 2025. Compiled by Sara Walls, therapist and bookkeeper, littlefrogfinancial.com

Sara Walls