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.
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.