How to File 1099 MISC for Independent Contractor

how to file 1099 misc

Wondering how to file 1099 MISC? Filing 1099s is pretty straightforward if you know how to do it correctly i.e. according to the guidelines prescribed by the IRS. However, for your convenience, we have created this resourceful guide, which will show you exactly how to file 1099 MISC for independent contractors.

Table of Contents

What is Form 1099 MISC?
What are the Different 1099 Tax Forms?
Who is an Independent Contractor?
Do You Really Need to File 1099 MISC This Year?
Parts of 1099 MISC Forms
How to Fill Out 1099 Form?
Sample 1099 MISC Form
1099 MISC Form Filing Deadlines
Penalties for Late Filing
How to Save Time & Money Filing 1099 MISC?
What Not to Report on Form 1099 MISC?
1099 Tax Tips for Employers


What is Form 1099 MISC?

Form 1099 MISC is a tax form used by IRS to track all the miscellaneous income paid1099-MISC-Form to the non-employees (independent contractor) in the course of the trade or business. In a simple context, you must file 1099 MISC if you have paid any independent contractor a sum of $600 or more in a year for their services for your business or trade. The independent contractors need to report these payments on their tax returns as well.

For example, if you hire a website developer on a contract basis to develop a website for your business and paid $2000 for their services, then you must report the $2000 payment to website developer on Form 1099-MISC.


What are the Different 1099 Tax Forms?

Since there are many types of 1099s, which are used for different purposes, the 1099-MISC form is a catchall for all miscellaneous income. It is generally the most applicable and most used by many business owners to report contract services.

However, the other 1099 forms are 1099-A, 1099-B, 1099-C, 1099-CAP, 1099-DIV, 1099-G, 1099-H, 1099-INT, 1099-K, 1099-LTC, 1099-MISC, 1099-OID, 1099-PATR, 1099-Q, 1099-R, and 1099-SA.


Who is an Independent Contractor?

An independent contractor is an unincorporated entity suchindependent contractor as a sole proprietor or LLC or member of a partnership or limited liability or estate that provides services to another business under the terms specified in a contract or an agreement. Some of the examples of independent contractors are:

Carpenter AC Technician Interior Designer Travel Agent
Photographer Attorney Plumber CPA
Logo Designer Application Developer Accountant Web Developer

Do You Really Need to File 1099 MISC This Year?

If you, as an employer or business owner, paid $600 or more to independent contractors for their services during the tax year, then you must file 1099. Other than services, filing 1099 is applicable for:

  • Prizes
  • Awards
  • Rent
  • Royalties
  • Physicians
  • Suppliers of health and medical services

For more detailed information, log on to IRS detailed information.


Parts of 1099 MISC Forms

Copy A: Federal Copy for filing with the IRS

Copy B: Recipient Copy (Sent to Independent Contractor)

Copy C: Payer Copy (Retained by the Employer)

Copy D/1/2: State and local filing (Depends on States Tax Rules)


How to Fill Out 1099 Form?

The following steps will help you in filing Form 1099 MISC without any concerns.

Step 1: Collect Accurate Information Beforehand

Once you make a payment to independent contractors, ensure you make them complete Form W-9 in order to collect contractor’s legal name, address, and Taxpayer Identification Number (TIN). The Taxpayer Identification Number may be either a Social Security Number (SSN) or an Employer Identification Number (EIN). IRS recommends business owners and employers to store W-9 files for at least four years for the future reference.

1099 taxs tipPRO TIP: Always make the contractors fill out and return W-9 once you engage them for the services for your business.

 

Step 2: Buy Your 1099 MISC Forms

Once you collected the correct information about your independent contractor, then get IRS-approved 1099 Forms. You can order standard 1099 MISC Forms from CheckMark. You can also order the forms from IRS but it may take up to 4-6 weeks to reach you. You can even buy the forms at any office supply store like Staples or OfficeMax.

1099 taxs tipPRO TIP: Never use a downloaded PDF format of 1099 Form from the internet because they are just for sample view and cannot be read and processed by IRS scanner.

 

STEP 3: Prepare Your 1099 MISC Forms

Start preparing 1099 MISC forms for independent contractors, once you have bought the 1099 forms. Fill your Federal Tax ID number (SSN or EIN) and contractor’s information (SSN or EIN) accurately. Ensure you enter the same amount of money you paid to the contractor in Box 7 under the title “Non-employee compensation.”

Finally, fill the contact information forms. If you have to file 1099s for multiple contractors, then repeat the same process until all the forms are completed without any errors. In order to file the 1099s pretty accurately, it’s always better to use 1099 software, which can automatically generate and file the information to IRS without any errors and blunders.

1099 taxs tipPRO TIP: In case if you have withheld any amount from the contractor (backup withholding), then you need to fill that specific amount in the Box 4 or 11 in relation to any federal or state income tax you withheld.

 

STEP 4: Send Copy B of 1099 to Independent Contractor

Now, send the 1099 Copy B to independent contractors whether via postal mail or hand them personally. The deadline to send the 1099 MISC Forms to the independent contractors is no later than January 31, 2017. The due date is extended to February 16, 2017, if you are mentioning payments in boxes 8 Or 14.

1099 taxs tipPRO TIP: Never delay in sending the forms to the independent contractors because IRS may impose heavy penalties for late distribution if there is no genuine reason.

 

STEP 5: Submit Copy A of 1099 to the IRS

Copy A of each Form 1099 and Form 1096 () should be submitted to IRS by February 28, 2017, if you file by mail. If you are filing 1099s electronically, then the deadline is March 31, 2017, and you don’t need to eFile Form 1096. Form 1096 is an Annual Summary and Transmittal of U.S. Information Returns, which summarizes the totals from your returns from 1099s. This form is only needed if you are filing on paper.

Some states have different 1099 tax rules, so in order to stay compliant with the local 1099 filing requirements, sometimes you also need to file 1099 forms with your state. Visit the State Government Websites and find local 1099 filing requirements.

1099 taxs tipPRO TIP: NEVER submit downloaded 1096 form from the internet because they cannot be processed by IRS scanner. The fine for submitting the unscannable form to IRS is $50. Ensure you submit RED Scannable Form always.

 

STEP 6: Retain Copy C of 1099 MISC Form

Retain and store Copy C of 1099 MISC Forms for at least 3-4 years for future reference. It’s always better to create a separate record for storing all the forms in one safe place.


Watch The Video To Get More Information About Filing 1099 Misc…


SAMPLE 1099 MISC FORMS

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1099 MISC Form Filing Deadlines

1099 deadines

The following are the deadlines for sending 1099 forms to the contractors and for paper filing or e-filing them with the IRS. Always prepare and file 1099s before the deadline in order to get saved from heavy penalties for late submissions from IRS.

Form Due to Recipient Filing to IRS By Mail E-filing to IRS
1099-MISC Jan 31, 2017 February 28, 2017 Mar 31, 2017
1099-B
1099-S
1099-MISC boxes 8 or 14
Feb 15, 2017 February 28, 2017 Mar 31, 2017

Penalties for Late Filing

The penalties for late filing range from $30-$100 per missed 1099 tax form, depending on how late the forms were submitted.

Penalty per Form Length of Delay
$15 Within 30 days after deadline
$30 More than 30 days late but before August 1st, 2017
$50 Filing on or after August 1st, 2017
$250 Intentionally neglecting to file

The maximum penalty is a total of $1,500,000 for the large businesses and $100,000 for the small businesses.

1099 taxs tipPRO TIP: In case if you were unable to file 1099 on time, you always have the option to request a 30-day extension by filing IRS Form 8809 (Extension of Time to File Information Returns).You MUST have a valid reason for getting an extension from IRS.  However, this extension does not extend the February 1 deadline for submitting the Copy B of 1099 to the independent contractors.

 

How to Save Time & Money Filing 1099 MISC

Preparing and filing 1099 MISC Forms is always a tedious and time-consuming job. One small mistake can cost you dearly. The best way to save time and money is to consider an automatic option i.e. 1099 Software. There are many options available but CheckMark 1099 Software makes 1099 filing just like a breeze.

1099 Print Software1099 eFile Software

 

What Not to Report on Form 1099 MISC?

Not all payments come under 1099 MISC Form. Some of the payment, which you should not report on 1099-Misc are:

  • Payments to corporations
  • Payments to employees ( Never classify employees as independent contractors)
  • Payments for goods such as merchandise, telephone, freight, storage, and similar items
  • Payments of rent to property managers or real estate agents
  • Personal or household payments such as housekeeping, gardening, and babysitting
  • Payments for non-business related services
  • Payments to trusts

1099 Tax Tips for Employers

  1. Classify employee and independent contractor correctly.
  2. Make the contractors complete the Form W-9 when to pay them so that you can get hold of contractor’s legal name, address, and Taxpayer Identification Number (TIN).
  3. Never fail to send the forms to independent contractors before the deadline.
  4. If you are eFiling 1099s directly to IRS, then no need to prepare 1096 forms.
  5. Always keep the record of 1099 Forms for future use.
  6. Never use the free version of 1099 MISC Forms available on the internet. They are not accepted and processed by IRS.
  7. Always use software for eFiling 1099 MISC forms to IRS. It will save you time, money and resources.

If you are having problems in figuring out how to file 1099 MISC before the deadline, you can always reach us at any time. We’d be happy to ease out the pain in filing 1099 MISC Forms saving you time and reducing any potential for human error.

1099 Deadlines, Penalties & State Filing Requirements for 2017

1099 Deadlines

As the end of January approaches, it is important for all the employers to prepare and issue 1099s to the recipients, and file them to IRS responsibly without any delay.

1099 tax form, referred to as “Information Returns,” should be send by the company to the independent contractors if it paid more than $600 to them in 2016. Since there are many types of 1099 forms, the common forms are 1099-MISC, 1099-INT, 1099-S, 1099-C, 1099 B, 1099-R and 1099-DIV.

It’s important for the employers to prepare and file the appropriate 1099s to the IRS before deadline otherwise heavy penalties for late submissions or wrong information will be imposed. The following table will help you to remember all the dates for sending tax forms to the contractors and for paper filing or e-filing them with the IRS.

1099 Deadlines for 2017

Form Due to Recipient Filing to IRS By Mail E-filing to IRS
1099-MISC Jan 31, 2017 February 28, 2017 Mar 31, 2017
1099-B
1099-S
1099-MISC boxes 8 or 14
Feb 16, 2017 February 28, 2017 Mar 31, 2017

1099 deadines

Penalties for Late Filing

The penalties range from $50-$530 per missed 1099 tax form, depending on how late the forms were submitted.

Penalty per Form Length of Delay
$50 More than 30 days late
$100 More than 30 days late but before August 1st, 2017
$260 Filing on or after August 1st, 2017
$530 Intentionally neglecting to file

The maximum penalty is a total of $1,064,000* for small businesses. In all cases, the IRS considers you to be a small business if you’ve earned an average of $5 million or less in annual revenue for the past three tax years.

New State Filing Requirements

Combined State/Federal Program for 1099-series

Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, South Carolina, Vermont, Virginia, Wisconsin.

States with no 1099-MISC filing requirement:

Alaska, Florida, Illinois, Nevada, New Hampshire, North Carolina, New York, South Dakota, Tennessee, Texas, Washington, Wyoming

States that require 1099-MISC filing, if you withheld:

Kentucky, Rhode Island, Utah, West Virginia

States that require a separate 1099-MISC filing or are unclear on their filing requirements:

Iowa, Massachusetts, Oklahoma, Oregon, Pennsylvania, Washington DC

We hope you will be feeling prepared, informed, and ready to file your 1099s. CheckMark’s 1099 tax software will help you in filing 1099s just like a breeze.  You can have 1099 Print or 1099 E-file version depending on your requirement i.e. if you are filing 250 or more information returns for the calendar year, then e-fling is a must. Else, you can paper file and mail to IRS for less than 250 information returns.

If you have any questions about the 1099 filing, you can reach us at any time. We’d be happy to help you out.

Small Business 1099-MISC Guidelines and Requirement

Small Business Tax Filing

Form 1099-MISC primarily gives information about independent contractors to the IRS.

As per the guidelines from the IRS businesses are required to submit information returns. Form 1099 is used to report remuneration earned by an independent contractor. There are 17 types of 1099 forms, and IRS defines small businesses as the ones having gross revenues of $5 million or less. Form 1099-MISC is used by these small businesses.

What needs to be Reported
Form 1099-MISC is used to inform payments of services only that are related operating a company when the payments are equal to or in excess of $600 in a given year. The rules of eligibility to report are straight forward – small business owners who have paid to seek services from an unincorporated vendor which must be at least $600 in the accounting year are defined by the IRS to report Form 1099-MISC. It is mandatory that the reporting be done for services only and that to from unincorporated vendors – for instance seeking services for software installation from XYZ Computers needs to be reported in Form 1099-MISC.

Who needs to Report
Internal Revenue Services has laid clear guidelines for the 1099-MISC reporting – the four conditions that are to be met are – the payments should be made to a individual (not an employee), payments that are done to seek services that are essential for running the business, the payments that is atleast $600 for the accounting year. As an example – payments of atleast $600 for the year made in favor of architects, lawyers, contractors etc are liable to be reported in Form 1099-MISC. Also, payments made to the employee’s nominee after the employees death is to be reported using a 1099-MISC. Small business owners in order to file the 1099-MISC would need each individual’s taxpayer identification number. The Form with the IRS approved format can be printed using CheckMark’s 1099 Software, also the business owner may try the e-File version of 1099 software to fill in the values and post it directly to the IRS electronically.

How to File
The small business owner has to file one copy of the 1099-MISC with the IRS and the second copy has to be handed over to the person/individual whose services were used. As said earlier the business owner can e-File the same to the IRS. Forms downloaded from IRS website cannot be scanned and filing non-scannable forms can result in penalty. As already mentioned CheckMark’s 1099 software print version is capable to print out Form 1099 as per IRS directives after the values are placed. You may file the print version manually or try the CheckMark’s 1099 Software e-File version which has print and electronic submit feature.

IRS Penalties

As per the small business jobs act IRS has placed stringent rules to maintain accurate and timely submission of Form 1099-MISC for small businesses. Some of the broader penalties are mentioned below. Filing Form 1099-MISC late but within 30 days of the deadline incurs a penalty of $50 per 1099 submission to as high as $186,000. Filing with inaccurate data penalties depends upon when you have finally reported correct information and a minimum of $530* per 1099-MISC submission and is categorized under – intentional disregard to provide accurate information.