[UPDATED FOR 2020]
If you need to a file a 1099-MISC form for your business for the first time but don’t know where to begin, don’t worry – we’re here to walk you through the ins and outs of it.
First things first: Get organized
Nobody actually loves tax season, not even accounting nerds like us. It can be an especially rough time for businesses with complicated or unorganized financial situations.
For the sake of your personal sanity and overall well-being, you should first get your financial records in order before you even try to tackle any tax-related tasks. This will help the tax-filing process to go much more smoothly.
Once you’ve cleaned up your books, you’ll need to prepare all the necessary tax documents that you’re required to file for your hired help. This includes preparing your 1099-MISC forms for workers or vendors who do not qualify as employees. This can be a confusing area, so we’ve addressed some frequently asked questions for you below.
FAQs about 1099-MISC Forms
What is a 1099-MISC form?
A 1099-MISC form is an IRS tax form that reports payments made to an independent contractor or unincorporated business. The business or individual that makes the payments is responsible for preparing the form, delivering a copy to the contractor, and filing the form with the IRS (as well as the State Tax Department, if necessary).
When does a business need to file a 1099-MISC?
Your business will need to file a 1099-MISC if you paid $600 or more to someone who’s not an employee (such as an independent contractor or an unincorporated business) for services related to your business using cash, check, or bank transfer (ACH).
Not sure who qualifies as an independent contractor? Check out the difference between an employee and an independent contractor, as defined by the IRS.
What’s the deadline for filing a 1099-MISC?
You need to file a 1099-MISC (Copy A) with the IRS by January 31, 2020 (the same deadline applies for W-2 forms for your employees, but that’s a different post). You must issue Copy B of this form to your contractors by no later than January 31, 2020.
What happens if I’m supposed to issue a 1099-MISC, but don’t?
You may have to pay a penalty to the IRS. The amount of this penalty is based on when you file the correct information with the IRS and the contractor.
What if I’m supposed to receive a 1099-MISC, but don’t?
If you should have received a 1099-MISC but it either came late or not at all, you’re still required to report any income earned over $10 to the IRS.
How do I prepare and file a 1099-MISC?
- Start by determining who meets the qualifications for receiving a 1099-MISC.
- Collect a W-9 from all qualified individuals with their Taxpayer ID Number (or Social Security Number, for sole proprietors), address, and the legal name of the business.
- Enter the total amount you paid the contractor in Box 7: Nonemployee compensation of the 1099.
- File Copy A of the 1099 to the IRS. You may be able to file electronically using your tax accounting software, or through a service like 1099Online.com. Again, you must file this by January 31, whether you file by mail or electronically.
- Send Copy B to the contractor. You have the option of doing this either by mail or email, but you must receive the contractor’s consent to send it via email, according to IRS rules. Again, you must be sure they receive this by February 15.
Need help? We can take care of this for you.
If you’ve read this far, and you’re feeling a growing sense of dread in the pit of your stomach, fear not! We can help!
Simply reach out to us with your contractors’ W-9 info and the amount paid, and we’ll handle filing your 1099 forms for you. And feel free to ask questions in the comments below!