Both businesses and independent contractors need to prepare for 1099-MISC Form season. ATAX has great info on what you need to do to be ready.
Any business that pays gig workers, freelancers, vendors, or independent contractors more than $600 in business-related wages each year must send out a completed IRS 1099-MISC Form annually.
The workers need this form to file their tax returns properly. The process to fill out this form isn’t as difficult as it seems at first, which is described below. Plus, ATAX tax professionals are available to help with any questions you may have.
What is a 1099-MISC Form?
An IRS 1099-MISC Form lists income paid to all non-employee workers that totals at least $600 per year, including to any partnerships or LLCs that may have been contracted for work. This form is also sent by the business to the IRS so that independent contractors’ tax returns can be verified against what the companies have paid them.
Since employers aren’t required to withhold federal income taxes, state taxes, unemployment taxes, social security, or Medicare taxes for independent contractors, the IRS wants to make sure these taxes are paid through the worker’s tax return.
When is the deadline for a 1099-MISC Form?
Companies are required to send out 1099s to all independent contractors by January 31. Businesses must file those same 1099s to the IRS on paper by the last day of February or electronically by March 31.
If a company misses these deadlines, the penalty is $30–$100 per late form up to an annual maximum of $500,000. If a business doesn’t provide any 1099s at all to its independent contractors, the penalty is $250 per form, and there’s no maximum number of fines.
Obviously, it’s extremely important for a business to fill out and mail these forms on time because the fines can add up quickly otherwise. If you need help with 1099-MISC forms or any other tax forms, please contact an ATAX tax professional right away.
How do you prepare a 1099-MISC Form?
· The first step to preparing a 1099-MISC Form is to make sure you have the correct information for your independent contractors on a W-9 form. This includes their legal name, address, and Social Security Number or Employer Identification Number (EIN). It’s always a good idea to double-check this info with the contractor before you begin filling out the 1099.
· Next, you must get the physical paper forms. You cannot download a form or sample from the IRS. The 1099-MISC Form must be readable by an IRS scanner. To get the official forms, you can order them from the IRS on their website or by calling 1-800-829-3676.
· Now it’s time to actually fill out the form. This includes all the personal information listed above plus how much they were paid over the course of the year. You must also list any pay withheld for federal or state income tax.
· Once you’ve finished preparing the forms, it’s time to mail the Copy B sections of the forms out to the workers. Be sure to allow enough time so that the contractors receive their 1099s by January 31 at the latest to avoid the possibility of any fines.
· The business must now send IRS Form 1096, which contains the total amount of all their 1099s. Form 1096 and Copy A of each 1099-MISC Form must be sent to the IRS by the last day of February (if by mail) or by March 31 (if electronically).
· Make sure you retain the Copy C sections of all your completed 1099-MISC Forms for your records so you can answer any questions the IRS may have later.
If a business has many independent contractors, the process of filling out 1099s can take quite a bit of time and work. If you get overwhelmed, don’t hesitate to contact an ATAX tax professional for help.
Independent workers who are expecting 1099-MISC Forms also need to keep track of which companies will be sending them.
Your tax-filing experience will be much easier and quicker if you file after you’ve received all your necessary 1099-MISC Forms. Independent contractors need all their 1099-MISC Forms to accurately complete the Schedule C portion of their Form 1040. But if you receive a form after you’ve already filed, an ATAX tax professional can help file an amended return, depending on your situation.
To learn more valuable tax information, call ATAX toll free at 1-866-999-2829, or stop by an ATAX office located conveniently nearby. You can also follow us in real time on Facebook, LinkedIn, and Twitter.