Can You 1099 an Employee for a Bonus?
If you give your employee a bonus, you can report it on a 1099. In this case, the payment is not considered to be reportable as regular wages. Therefore, you have not withheld income tax, social security tax, or Medicare tax on the payment. By reporting this on a 1099 and providing that 1099 to the employee, the burden of paying those taxes falls to the individual – not to your business.
However, it is important to remember the 1099 payment threshold. If the bonus your employee receives is under $600, you will not need to issue a 1099. In that case, the responsibility will fall to the employee to report it while completing their personal taxes. However, if the bonus payment is over $600, you should issue a 1099-MISC. The income best fits into 1099-MISC box 7, or the area designated for non-employment compensation. When the 1099-NEC becomes available to employers, it may make more sense to report bonuses using that iteration of the 1099 instead.
Can You Give a Bonus to a 1099 Worker?
The reverse of, “can you 1099 an employee for a bonus,” is more straightforward. Can you give a bonus to a 1099 worker? In general, if you pay a bonus to an independent contractor, that payment must be reflected on the 1099 form. Otherwise, you and/or your contractor can face penalties. The only situation in which you are not required to report a bonus is if the contracted pay is less than $600. In that case, you do not need to issue a 1099 form at all.
Filling Out 1099s with AMS
You’d be surprised by how many businesses need to handle 1099 forms with some regularity. Even if all the folks who work for you are employees, you may need to issue a 1099 for a sizeable bonus. You might also have to contract out an unexpected task, like a website redesign. In both of these cases, you should ensure you have access to a 1099 filing software. Luckily, the primary tool in the Advanced Micro Solutions suite includes support for both W-2 and 1099 forms. All you have to do is enter the correct information.
W2 - 1099 Forms Filer Pricing
|AMS W2 & 1099 Software|
|Price $79 Order Here!|
If you’re interested in trying our W2/1099 filer, consider checking out our free software demo. Additionally, we’ve found the following features to be most useful to our users.
- A Common Payee File allows the user to select a Payee across payers/1099 forms without having to type in the same information multiple times
- Entering information is easy, and the entry screen resembles actual forms
- Data is automatically saved through the 1099 software whenever a new record or form is accessed
- Prints Tables and Worksheet Reports, along with Client Letters, Recipient Lists, and Mailing Labels
- The Table Report generates hash totals of SSNs and TINs for checking data entry accuracy
So, can you 1099 an employee for a bonus? Technically, yes. Can you give your 1099 worker a bonus? Always, but the distributed 1099 should reflect this payment. Remember that these questions never have easy answers, but with an accounting software tool in your back pocket, you can rest assured that you’re prepared for whatever business-related challenges come your way.