1099s – What Are They? With tax season quickly approaching, one of the big questions that we get is based around the 1099 form. While there are multiple kinds, we’re going to focus on the 1099 MISC.
So, what is the 1099 MISC tax form?
This is a tax return document that is used to report miscellaneous payments that are made to non-employee individuals. These could include independent contractors, rent paid, or attorney fees that are paid out over the year.
The main stipulation in issuing this form is that the miscellaneous payments need to be over $600 for the year in services or rents paid out. You must file a 1099 MISC whenever you pay an unincorporated independent contractor who may be a sole proprietor, LLC, or part of a partnership with cash (check, Venmo, PayPal) NOT with a credit card. This tax form would NOT be issued if you were working with a corporation.
The first thing you need to do is collect the vendors W9 form, which will be needed in order to properly issue the 1099 MISC form at year-end.
Are you familiar with the W9 form?
This is simply a tax form that the individual you are working with would fill out to provide more of their needed personal information. It is most commonly used by individuals when they are working as a freelancer or independent contractor and asks for items like their taxpayer identification number or their social security number, along with their address. Companies who are paying you money would request this from you in order to have the correct information they would need to notify the IRS of the amount they paid you over the course of the year.
The 1099 MISC needs to be filed by January 31st.
It’s important that you file the form by the date required, or you may be fined a late fee.
You’re not done yet, though! Of course, filing taxes requires more forms than just the 1099 MISC!
The 1096 is also a form that will need to be sent to the IRS will your tax return.
This form is a summary tax report, which will show all of the 1099 MISC forms that you are filing. In other words, if you have 5 1099 MISC forms that are being filed for 5 different contractors you worked with throughout the year, you will also need to submit ONE 1096 form that would consolidate the 5 forms with a total.
The 1096 form must also be filed by January 31st, but you do NOT have to file a 1096 form if you e-file all of the 1099 forms!
Double check all relevant information is included on the 1096 form about you, including your EIN. And don’t forget to sign and date all tax forms before submission!
Like all things tax related there always seems to be more than one copy that is needed, as well. But who gets what when it comes to the 1099 MISC form?
You’ll see that there are many copies of the 1099 MISC form. Different copies of the form can potentially get sent to different agencies, so take notice of what you are sending out. There aren’t necessarily any differences between them, it’s all a matter of who gets sent the specific copy below:
- Copy A is sent to the IRS
- Copy 1 is sent to your state tax department
- Copy B is for the recipient, who would also be the vendor that you used during the year
- Copy 2 is also for the recipient to file with their own state income tax return
- Copy C is for you to keep
Two of the copies are required to send to the recipient so that they are able to include one form with their federal returns and one with state returns. This also will allow them to know how much you are reporting to the IRS.
And now when you hear 1099s – What Are They? You have a great working knowledge of the 1099 MISC tax form and what you would potentially use it for. Easy peasy, right?! Before you know it, tax season will be upon us so it’s never too early to get things in order.
If this is something that you have had trouble in the past, please contact us and we can help you out.