What You Need to Know Before You Prepare Form 1099-MISC
Form 1099-MISC is titled "Miscellaneous Income." This form is provided by employers to contract workers (independent contractors and other non-employees) to report payments made during the year. A 1099-MISC form must be given to anyone to whom $600 or more has been paid during the year.
Contract workers and non-employees need this information to report income on their personal or business federal and state income tax returns. The form is also filed with the IRS for verification purposes.
The information provided on Form 1099-MISC includes non-employee compensation, federal and state income taxes withheld, and medical and healthcare payments.
Must I Submit Form 1099-MISC for a Small Amount of Payment?
You must provide Form 1099-MISC to individuals and businesses who you paid $600 or more during the past year, $10 or more of royalties paid, and direct sales of $5,000 or more of consumer goods for resale.
To Whom Must I Give Form 1099-MISC?
Form 1099-MISC must be provided to any non-employee to whom you paid $600 or more during the calendar year. The question of who must receive a 1099-MISC is complicated. A 1099 MISC form in the following examples:
- Payments for rental property expenses.
- Payments to a physician, physicians' corporation, or other suppliers of health and medical services issued mainly by medical assistance programs or health and accident insurance plans.
- Payments for services performed for a trade or business by people not treated as its employees. Examples: fees to subcontractors or directors and golden parachute payments.
- Fish purchases paid in cash for resale.
- Crop insurance proceeds.
- Gross proceeds paid to attorneys (box 14). (Due to IRS February 15th).
In addition, payments to certain types of corporations must be reported including medical and health care payments (box 6) and attorney fees (box 7).
Should You Use Form 1099-MISC or Form W-2?
When is Form 1099-MISC Due? Who Do I Send It To?
Form 1099-MISC must be provided to "non-employees" (as described above) no later than January 31 each year. You can send the form by mail or provide it online.
The deadline for filing 1099-MISC forms and 1096 transmittal forms with the IRS has been changed effective from the 2016 tax year. For the 2018 tax year, the deadline for giving these forms to payees and the deadline for filing the forms is the same date: January 31, 2019.
To avoid errors, give the 1099-MISC form to the payees early in January. This will give them time to review the form and for corrections to be made.
Along with Copy A of all the 1099-MISC forms, you provided to non-employees, you must submit Form 1096 transmittal form to the IRS, which totals all information from all 1099 forms.
You do not have to submit the 1096 form if you e-file the 1099 forms.
How Do I Get Copies of 1099 Forms?
You can obtain 1099-MISC forms at your local office supply store, from a payroll service, from an online payroll software program, business tax program, or directly from the IRS. You cannot use 1099-MISC copies downloaded from the Internet because Copy A of the 1099-MISC form is in a specific color of red ink and cannot be duplicated. Here is a link to the IRS Form 1099-MISC.
This form cannot be submitted to the IRS because it cannot be downloaded and printed. For more information, here is a link to the Instructions for Form 1099-MISC.
How Do I Complete Form 1099-MISC?
Before you begin working on the 1099-MISC form, you will need
- The total amount of payments for this person or business, and
- The person's taxpayer ID number, and address.
If you withheld amounts from these payments, you will also need to report the total backup payment amount for the year on the 1099-MISC form.
How Do I Submit Form 1099-MISC? Can I Submit Form 1099-MISC Online?
You can submit all Form 1099-MISC along with the transmittal form 1096 to the IRS by mail or online. If you file 1099-MISC forms online, you do not need to include a copy of the 1096 transmittal form.
What If I Submit Form 1099-MISC Late?
You may be subject to late filing penalties if you submit 1099-MISC and 1096 forms after the due dates. The amount of the penalty is determined in part by how late you file and the size of your business.
Remember that using a payroll service provider does not relieve you of the responsibility to ensure that the 1099 forms are filed correctly and on time. If your failure to file is intentional, the penalty is at least $100 for each type of form and with no maximum.
What If I Make an Error in Form 1099-MISC?
If you make a mistake in completing a 1099-MISC form, and the error is discovered before you submit the form to the IRS at the end of February, just correct the mistake. That is why there is a one-month time between providing forms to contract workers and submitting them to the IRS.
If you discover an error after you have submitted the form to the IRS, you must submit a corrected 1099-MISC form. To correct a 1099-MISC form, check the "corrected" box at the top, and do not forget to change Form 1096 if the correction affects totals on this form.