Understanding the 1099 Filing Requirements for Business Owner

As a business owner, adhering to IRS regulations is crucial, especially when it comes to filing 1099 forms. The IRS mandates that 1099s, including Form 1099-NEC and 1099-MISC, be filed by January 31st, 2026, for most cases. This post provides an overview of these requirements and how to ensure compliance.

Understanding 1099 Forms: Form 1099 is used to report various types of income other than wages, salaries, and tips. The most common ones include:

1. Form 1099-NEC: This form reports non-employee compensation. If you’ve paid more than $600 to non-corporations for services in 2025, you need to file this form.

2. Form 1099-MISC: Used for miscellaneous income, this form covers rent payments (including self-rentals) and other types of payments.

3. Form 1099-INT: For reporting interest income.

Sample of Common Situations Requiring 1099s:

• Services Payments: Payments to non-corporate entities or individuals for services amounting to over $600 in the year.

• Rent Payments: This includes any payments you make for renting office space, equipment, or other property.

• Payments to Attorneys: Regardless of their business structure, payments to attorneys typically require Form 1099.

• Other Payments: Various other transactions may require 1099 reporting; it’s essential to consult with a tax professional or the IRS for specific guidance.

State Requirements: In addition to federal regulations, many states have their own requirements for filing 1099s. Ensure you’re aware of and comply with both federal and state mandates.

Importance of Timely Filing: Late filings can result in significant penalties. Understanding information return penalties is vital to avoid unnecessary costs.

Collecting Vendor Information: To streamline the filing process, request a completed W-9 form from every vendor before issuing any payments. This will provide you with all the necessary details for 1099 reporting.

Filing Options:

• Online: Use accounting or payroll software, or other online tax filing services.

• Paper Filing: An option, though less efficient, is to paper file. Ensure copies are sent both to the IRS and the recipient.

Staying informed and prepared for 1099 filings is crucial for every business owner. Ensure you understand the requirements, gather necessary information early, and consider the most efficient filing method for your business.

Need more information or guidance on 1099 filings? Visit the IRS website or contact a us.

Connect with me: Facebook / X / LinkedIn

Subscribe to the Tax YouTube Channel. 

_{Here’s a quick reminder for both individuals and businesses that pay quarterly estimated taxes. The upcoming payment deadline is January 15, 2026.}

Just a reminder to put 2025 health insurance premiums for 2% owners on the Form W2.

For more details you can visit our learning center.

Minnesota has begun issuing Paid Leave premium rate notices, and many businesses are discovering incorrect classifications. My firms letter was incorrect. Each notice lists separate rates for Medical Leave and Family Leave, and together they should total either 0.66% or 0.88%, depending on whether the state recognizes you as a small employer. Most of you reading this should be at the 0.66%.

If your combined rate shows 0.88% but you expected to qualify for the reduced rate, you will need to challenge the determination. The appeal deadline shown on recent letters is January 5, 2026, and the filing steps are outlined on page 2 of the notice. You can also file an appeal here.

To qualify for the lower employer rate, a business must have 30 or fewer employees and an average wage below 150% of the statewide weekly average. The annual average wage is about $110,000. The reduction applies only to the employer portion; employee withholding percentages remain the same.

If you believe your rate is incorrect, act promptly. If you are a payroll client reach out right away.

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This issue will have a lot of great content for business owners crafted by Aaron Stegner!

Table of Contents

1. MN Pass-Through Entity Tax

2. Reasonable Wage

3. Accountable Plan

4. Business Year End Planning

5. Personal Year End Planning

6. S-Corp Year End Reminders

Minnesota Pass-Through Entity Tax (S-Corp and Partnerships)

S-Corps and partnerships can elect to pay Minnesota tax on behalf of the shareholders making the payment tax deductible.

Check out the video 👇️ 

Please like and subscribe!

Reasonable Wage (S-Corp)

Remember a key provision and hot topic of being an S-Corporation is paying the officers a reasonable compensation!

If you want my help with a reasonable wage analysis let me know.

Check out the video👇️

Please like and subscribe!

Accountable Plan (S-Corp)  

An S corporation can pay the owner for the costs of a dedicated home office tax free under an "accountable" plan.

Check out the video👇️ It is a little longer because of the detail!

Please like and subscribe!

Business Year End Planning

1. Invest in Business Equipment: If you’re considering purchasing new equipment, doing so before year-end can allow you to take advantage of depreciation deductions.

2. Defer Income: If possible, defer some income to the next year, especially if you expect to be in a lower tax bracket.

3. Accelerate Expenses: Paying upcoming expenses now, like supplier invoices or rent, can increase your deductions for the current year.

4. Review Your Business Structure: Ensure your business is structured optimally for tax purposes. Sometimes, restructuring can lead to significant tax benefits.

5. Claim Home Office Deductions: If you work from home, you may be eligible for home office deductions, which can include a portion of your housing expenses.

6. Make Estimate Payments: Paying business and personal estimate payments ensures that you do not pay penalties and interest. They may also help ensure you qualify for other business elections.

7. MN PTE Election: Make estimate payments and pay fourth Quarter before year end.

8. Utilize Tax Credits: Be sure to explore all available tax credits, such as the Research and Development credit, which can directly reduce your tax liability.

Individuals Year End Planning

• Maximize Retirement Contributions: Contribute to your employer provided retirement plan.

• Contribute to an HSA: If eligible contribute to an HSA and get the triple tax benefit!

• Harvest Tax Losses: If you have investments that have lost value, consider selling them to offset gains and potentially reduce taxable income.

S-Corporations Year End Reminders

• If you want to be an S - Corporation for 2025 we need to file Form 2553 by March 15, 2025.

• Don’t forget to add your health insurance to your W2.

• Personal miles on an S-Corporation vehicle need to be added to the W2.

Connect with me: Facebook / X / LinkedIn

Subscribe to the Tax YouTube Channel. 

The Minnesota Paid Leave launches on January 1, 2026. This program provides job-protected, paid time off for qualifying medical and family reasons.

This is separate from Earned Sick and Safe Time (ESST).

Requirements

1. Notification:

Must notify employees in two ways by December 1, 2025.

1. Post the workplace poster in a conspicuous place.

2. Notify each employee by December 1, 2025 and new employees within 30 days. You can use this template from MN.

2. Setup Paid Leave Administrator Account:

You need to designate a paid leave administrator. This is where you will review paid leave applications and eligibility determinations. Here the link for more details.

3. Job Protection:

Jobs are protected and must be restored to the same level before they took leave. The protection starts after 90 days of employment.

Covered Employees

Coverage is very broad including S-Corp owners who receive a paycheck. Note the green box is covered, purple can opt in and orange cannot be covered or opt in.

Employees are covered if they:

• Work at least 50% of their time in Minnesota.

• Live in Minnesota and work in multiple states, with no single state accounting for more than 50% of their time.

• Must have earned at least $3,700 in 2024 to qualify.

Leave Types & Duration

• Medical Leave: Up to 12 weeks for an employee’s own serious health condition.

• Family Leave: Up to 12 weeks for bonding with a new child, caring for a family member with a serious health condition, safety leave, or military family leave.

• Combined Total: Up to 20 weeks per benefit year.

All leave types require certification from a healthcare provider or designated professional and must last more than 7 days.

Timeline

Employer/Employ Cost

Total premium is .88% of wages with the employee covering up to 50% of the cost. So the employer is on the hook for a minimum of .44%. There is a discount that will likely apply to most businesses reading this newsletter. See the next section.

Small Employers Discount and Grants

Employers with 30 or fewer employees and average wages under $107,016 may qualify for reduced premiums and grants:

• Grants up to $3,000 per absence, capped at $6,000 per year.

• Qualifying employers will receive a 50% discount. In this case The total paid will be .22% employer and .44% employee. This assumes the employer is covering the minimum required.

MN will send out letters to tell you if you qualify as a small employer.

Employee Payments

• Up to 90% of wages, capped at the statewide average weekly wage (approximately $1,423 in 2025).

• Must have earned at least $3,700 in 2024 to qualify.

• Cannot collect Paid Leave while also receiving unemployment insurance, workers’ compensation, or Social Security Disability Insurance.

• Online premium and benefit calculators are available.

Helpful Links

Contact MN Paid Leave

Designate a paid leave administrator

MN Deed - Intro to Paid Leave Webinar - September 2025

^{_{The information provided here is for informational purposes only and should not be construed as or relied upon for tax or legal advice. This information is based on the laws and regulations in effect at the time of issuance, and we do not undertake any obligation to update this information after the date of its release. Please speak with your tax professional or attorney for guidance specific to your circumstances.}}

If you’re planning to sell capital assets (stocks, real estate, or other investments) understanding capital gains rates is key to maximizing your after‑tax returns.

Federal Capital Gains Tax Rates for Tax Year

Long-term capital gains apply to capital assets held more than one year. If you meet this holding requirement you can benefit from preferential federal rates of 0%, 15%, or 20%. The rate you pay is based on your taxable income and filing status. See brackets below.

Short‑term gains apply to capital assets held less than one year and are taxed as ordinary income tax brackets up to 37%.

Minnesota State Tax Treatment

Minnesota does not offer preferential capital gains rates. All net capital gains are added to your ordinary income and taxed up to 9.85%.

Other states have their own rules for capital gains rates.

Planning Tips & Strategies

1. Try to hold investments for over one year to qualify for the preferential rates.

2. Capital losses can offset capital gains. You can then deduct $3,000 each year of the unused loss annually. For more detail see my blog post Harvest Tax Losses

3. Coordinate sales in years with lower income to potentially fall into the 0% or 15% long‑term brackets.

4. Work with your financial advisor to consider how you should invest high return assets vs assets with more modest returns. Think pretax and post-tax retirement accounts and brokerage accounts.

5. There are exclusions for gains on your personal residences if you meet the requirements.

6. Watch out for Net Investment Income Tax (NIIT). You may owe an additional 3.8% on net investment income (including capital gains) when income exceeds certain thresholds.

2025 Capitals Gains Tax Brackets

Where your income falls in these ranges dictates what you pay for capital gains rates. Most common is the 15% rate. For example, if your income is $100,000 the 15% capital gain rates will apply to the gains you made on the sale of stock.

Single:

0% Rate – $0 to $48,350

15% Rate – $48,351 to $533,400

20% Rate - $533,401 and up

Married filing jointly:

0% Rate – $0 to $96,700

15% Rate – 96,701 to $600,050

20% Rate - $600,051 and up

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The OBBBA is one of the largest tax bills ever enacted. Here are the key provisions to look at. Fortunately, many of the changes made temporary tax laws from the Tax Cuts and Jobs Act permanent.

The Good

Individual

Income Tax Rates – Made the lower income tax rates from the Tax Cuts and Jobs Act (TCJA) permanent.

Standard Deduction – Locks in the higher standard deduction from the TCJA.

Child Tax Credit – Set at $2,200 per qualifying child by the TCJA. Indexed the deduction for inflation going forward.

Charitable Deduction for When Not Itemizing – Starting 2026, taxpayers who are not itemizing will be able to deduct cash donations up to $1,000 if filing single and $2,000 if married filing joint.

Seniors – Additional $6,000 for 2025-2028. Phased out based on income.

Tips – Deductible up to $25,000 for 2025-2028. Phased out based on income.

Overtime – Deductible up to $12,500 for 2025-2028. There are limits on highly compensated employees, phased out based on income.

Auto Loan Interest – Deductible up to $10,000 of car loan interest for 2025-2028. Many limitations including when the auto was purchased, assembled in the USA, weight limitations, original owner, just to name a few.

State and Local Tax (SALT) Deduction – Raises the SALT limitation from $10,000 to $40,000 for 2025-2029. There is an income limitation, but this is good news for many taxpayers that itemize.

Business

Qualified Business Income Deduction (QBI) – 20% deduction of business income made permanent.

Bonus Depreciation – First-year bonus deduction permanently set at 100% for qualifying property purchased after January 20, 2025.

Form 1099 – Payment requirements will be increased from $600 to $2,000 after 2025. This will also be indexed for inflation going forward.

The Bad

Charitable Contribution Deduction – Eliminates the charitable deduction of the first .5% of income.

Clean Energy Credits - Many of the clean energy provisions were rolled back: eliminating some, ending some in 2026 and adding other limitations.

The Ugly

The IRS has been understaffed and struggled with serving taxpayers for many years. When legislation is passed the IRS and Treasury must work on updating forms, instructions and taxpayer guidance. We won’t hold our breath!

Remember this is a high level summary while we wait for further guidance. Reach out if you want to know how these changes apply specifically to you.

Connect with me: Facebook / X / LinkedIn

Subscribe to the Tax YouTube Channel. 

Understanding the 1099 Filing Requirements for Business Owner

As a business owner, adhering to IRS regulations is crucial, especially when it comes to filing 1099 forms. The IRS mandates that 1099s, including Form 1099-NEC and 1099-MISC, be filed by January 31st, 2025, for most cases. This post provides an overview of these requirements and how to ensure compliance.

Understanding 1099 Forms: Form 1099 is used to report various types of income other than wages, salaries, and tips. The most common ones include:

1. Form 1099-NEC: This form reports non-employee compensation. If you’ve paid more than $600 to non-corporations for services in 2024, you need to file this form.

2. Form 1099-MISC: Used for miscellaneous income, this form covers rent payments (including self-rentals) and other types of payments.

3. Form 1099-INT: For reporting interest income.

Sample of Common Situations Requiring 1099s:

• Services Payments: Payments to non-corporate entities or individuals for services amounting to over $600 in the year.

• Rent Payments: This includes any payments you make for renting office space, equipment, or other property.

• Payments to Attorneys: Regardless of their business structure, payments to attorneys typically require Form 1099.

• Other Payments: Various other transactions may require 1099 reporting; it’s essential to consult with a tax professional or the IRS for specific guidance.

State Requirements: In addition to federal regulations, many states have their own requirements for filing 1099s. Ensure you’re aware of and comply with both federal and state mandates.

Importance of Timely Filing: Late filings can result in significant penalties. Understanding information return penalties is vital to avoid unnecessary costs.

Collecting Vendor Information: To streamline the filing process, request a completed W-9 form from every vendor before issuing any payments. This will provide you with all the necessary details for 1099 reporting.

Filing Options:

• Online: Use accounting or payroll software, or other online tax filing services.

• Paper Filing: An option, though less efficient, is to paper file. Ensure copies are sent both to the IRS and the recipient.

Staying informed and prepared for 1099 filings is crucial for every business owner. Ensure you understand the requirements, gather necessary information early, and consider the most efficient filing method for your business.

Need more information or guidance on 1099 filings? Visit the IRS website or contact a us.

Connect with me: Facebook / X / LinkedIn

Subscribe to the Tax YouTube Channel. 

Here is an overview of the Pass-Through Entity (PTE) Tax. Remember this is an estimate payment from the business entity and does not apply to sole proprietors or single member LLCs.

Other states also have similar elections.

Minnesota Pass-Through Entity Tax (S-Corp and Partnerships)

PTE Election Requirements:

• Eligibility Criteria: This election is specifically tailored for S-Corporations and Partnerships. Single-member LLCs do not qualify.

• Consent Requirement: A majority decision (over 50% ownership) is required to make the election. We recommend adding it to your annual minutes.

• Irrevocability: Once elected for a tax year, the decision cannot be altered.

• Filing: The election is made by adding it to the tax return when filing.

Why the MN PTE Matters:

• Tax Deductibility at the Business Level: By electing the PTE, the business pays state income tax, which is then deductible against its federal taxable income, calculated at Minnesota’s highest tax rate of 9.85%.

• Federal Tax Savings: This election effectively shifts the deduction of state taxes to the business level, potentially resulting in considerable federal tax savings for the business and its owners.

• State Tax Credit Benefit: On their individual Minnesota tax returns, owners are eligible for a credit equal to their proportionate share of the state taxes paid via the PTE election.

Potential Implications:

• Broader Business Impact: The reduction in reported income can influence various aspects of the business, including borrowing capacity and profit-sharing calculations. These impacts should be carefully considered in the context of the business’s overall financial strategy.

How to Proceed:

• Assessment and Documentation: Formally decide on the election, preferably through official annual minutes or similar records.

• Payment Procedures: Estimated tax payments, based on an approximation of 9.85% of expected business profits, should be made via Minnesota’s e-Services portal. Record and retain all payment confirmations for documentation. The fourth quarter estimate should be made in December of the current year for cash basis businesses.

• Election Filing: The actual election is made when filing the Minnesota state return. If subsequent law changes disqualify the entity, estimated payments can be refunded, and the election will not be made.

The MN PTE Tax Election offers a nuanced but potentially advantageous tax strategy for eligible businesses in Minnesota. Understanding the detailed requirements, evaluating the potential benefits and drawbacks, and following the correct procedures are essential for capitalizing on this opportunity.

Here is a link to the MN website:

Pass-Through Entity (PTE) Tax | Minnesota Department of Revenue

The Pass-Through Entity (PTE) Tax allows an entity to pay a tax on behalf of their partners, members, or shareholders.

www.revenue.state.mn.us/pass-through-entity-pte-tax

For more info check out the video 👇️ 

Please like and subscribe!

Connect with me: Facebook / X / LinkedIn

Subscribe to the Tax YouTube Channel. 

Welcome to the first issue of the Stegner CPA newsletter.

This issue will have a lot of great content for business owners crafted by me!

Table of Contents

1. MN Pass-Through Entity Tax

2. Reasonable Wage

3. Accountable Plan

4. Business Year End Planning

5. Personal Year End Planning

6. S-Corp Year End Reminders

Minnesota Pass-Through Entity Tax (S-Corp and Partnerships)

S-Corps and partnerships can elect to pay Minnesota tax on behalf of the shareholders making the payment tax deductible.

Check out the video 👇️ 

Please like and subscribe!

Reasonable Wage (S-Corp)

Remember a key provision and hot topic of being an S-Corporation is paying the officers a reasonable compensation!

If you want my help with a reasonable wage analysis let me know.

Check out the video👇️

Please like and subscribe!

Accountable Plan (S-Corp)  

An S corporation can pay the owner for the costs of a dedicated home office tax free under an "accountable" plan.

Check out the video👇️ It is a little longer because of the detail!

Please like and subscribe!

Business Year End Planning

1. Invest in Business Equipment: If you’re considering purchasing new equipment, doing so before year-end can allow you to take advantage of depreciation deductions.

2. Defer Income: If possible, defer some income to the next year, especially if you expect to be in a lower tax bracket.

3. Accelerate Expenses: Paying upcoming expenses now, like supplier invoices or rent, can increase your deductions for the current year.

4. Review Your Business Structure: Ensure your business is structured optimally for tax purposes. Sometimes, restructuring can lead to significant tax benefits.

5. Claim Home Office Deductions: If you work from home, you may be eligible for home office deductions, which can include a portion of your housing expenses.

6. Make Estimate Payments: Paying business and personal estimate payments ensures that you do not pay penalties and interest. They may also help ensure you qualify for other business elections.

7. MN PTE Election: Make estimate payments and pay fourth Quarter before year end.

8. Utilize Tax Credits: Be sure to explore all available tax credits, such as the Research and Development credit, which can directly reduce your tax liability.

Individuals Year End Planning

• Maximize Retirement Contributions: Contribute to your employer provided retirement plan.

• Contribute to an HSA: If eligible contribute to an HSA and get the triple tax benefit!

• Harvest Tax Losses: If you have investments that have lost value, consider selling them to offset gains and potentially reduce taxable income.

S-Corporations Year End Reminders

• If you want to be an S - Corporation for 2025 we need to file Form 2553 by March 15, 2025.

• Don’t forget to add your health insurance to your W2.

• Personal miles on an S-Corporation vehicle need to be added to the W2.

Connect with me: Facebook / X / LinkedIn

Subscribe to the Tax YouTube Channel.