IRS Form 1099-MISC is an information return that tells the IRS and other government agencies that the person named in the form has received taxable payments during the year. It’s one of the IRS’s main weapons in fighting underreporting by the self-employed. The IRS may impose various monetary penalties if a hiring firm intentionally fails to file a Form 1099 when required. When Form 1099-MISC must be filed The basic rule
is that you must file a 1099-MISC whenever you pay an unincorporated independent contractor — that is, an independent contractor who is a sole proprietor or member of a partnership or LLC — $600 or more in a year for work done in the course of your trade or business. If you’re a broker who employs independent contractor agents, you need to file 1099s for them, as well as any other contractor you paid at least $600 during 2012. Remember, however, that a 1099-MISC need be filed only
when an independent contractor’s services are performed in the course of your trade or business. A trade or business is an activity carried on for gain or profit. You don’t have to file a 1099-MISC for payments for non-business related services. This includes payments you make to independent contractors for personal or household service — for example, payments to babysitters, gardeners and housekeepers. Running your home is not a profit-making activity. Example: Eddy owns several
homes he rents out to tenants. He is in the business of renting houses. Eddy pays Linda, who operates a painting business as a sole proprietor, $1,750 to paint one of his rental houses. Eddy must report the $1,750 payment to Linda on Form 1099-MISC. Example: Eddy pays Linda $1,750 to paint his own home. He lives in this home with his wife and family and it is not a part of his home rental business. Eddy need not report this payment on Form 1099-MISC because this work was not done in the
course of his business. In addition, some business-related payments do not have to be reported on Form 1099-MISC, although they may be taxable to the recipient. These include
How and when to file Form 1099-MISC Form 1099-MISC is a multi-part form. Here are the parts of this form and where to send each:
You can obtain a 30-day extension of the time to file 1099s by filing IRS Form 8809, Extension of Time to File Information Returns. The form must be filed with the IRS by Feb. 28. The extension is not granted automatically. You must explain the reason you need it. The IRS will send you a letter of explanation approving or denying your request. Today, a majority of businesses file their 1099s with the IRS electronically instead of on paper. If you are required to file 250 or more information returns, you must file electronically with the IRS. Electronic filing can be easily accomplished with accounting software such as Quicken and QuickBooks. There are also several websites that provide 1099 filing services. Payroll tax services can also file these forms for you. Independent contractors must be provided with a paper copy of the 1099-MISC unless they agree to accept an electronic version. If you want to file a paper 1099-MISC, you cannot simply photocopy the form from the IRS website. Because it is a multi-part form, you need an original copy, which you can obtain from the IRS or stationery or office supply stores. If you have questions about filing Form 1099-MISC you may call the IRS toll-free at 1-866-455-7438. What is Form 1099-NEC?The 1099-NEC is a form specifically for reporting non-employee compensation—currently defined as payments to individuals not on payroll on a contract basis to complete a project or assignment. This would include all independent contractors, gig workers, or self-employed individuals who prior to 2020 had their payments reported in box 7 of a 1099-MISC form. For full details on how to file Form 1099-NEC, check out our complete guide to the 1099-NEC. The 1099-NEC is now used to report independent contractor income. But the 1099-MISC form is still around, it’s just used to report miscellaneous income such as rent or payments to an attorney. Although the 1099-MISC is still in use, contractor payments made in 2020 and beyond will be reported on the form 1099-NEC. The due date for the 1099-NEC is January 31 in the year following the applicable tax year. If January 31 does not fall on a business day, the due date will be moved to the next business day. The 1099-MISC is due March 1 if filed by paper, March 31 if filed electronically. If these dates don’t fall on a business day, the due date is moved to the next business day. Who requires a Form 1099-NEC?If your business paid a contractor more than $600 in a tax year, you’re required to file Form 1099-NEC. However, if the independent contractor is registered as a C corporation or S corporation, a 1099-NEC will not be required. This information can be found on the contractor’s Form W-9. Do not file a 1099-NEC for employees. Any employees will need to have a Form W-2 submitted to report wages, tips, and other compensation paid during the tax year. There are significant penalties for misclassifying employees as contractors. Our blog post on the differences between the two can provide you with a refresher before submitting a 1099-NEC. Who requires a Form 1099-MISC?If your business paid an individual or LLC at least $600 during the year in rent paid, legal settlements, or prize or award winnings, you are required to file a 1099-MISC. Who files the Form 1099-NEC?If your business hired a contractor and paid them more than $600 in a year, it’s your responsibility to file a Form 1099-NEC with the IRS and send a copy to the contractor. How to file Form 1099-NECFor every Form 1099-NEC, there are two copies that will be filled out with the same information: Copy A and Copy B. If you hired an independent contractor and paid more than $600 in the year, you must report their total earnings in that year. Copy A is for the IRS while Copy B is to be sent to the contractor. If you are the independent contractor receiving Copy B, it’s not your responsibility to file the Form 1099-NEC. However, you should request a copy of the form from your client for your records. All of your income will be reported on a Schedule C. What you need to fileIf you are the payer, request a Form W-9. This will include their:
It is the responsibility of the payer to file the Form 1099-NEC and the form will provide you with all the information you need to fill out any 1099 form. If you work with a payroll service (like Gusto) to pay your contractors, they will file and mail 1099 forms for each contractor. Your input will just be their Form W-9 up front. Check your bookkeeping records and confirm the total amount that was paid to each contractor over the course of the tax year. Use this information to finish filling out the Form 1099-NEC. Submitting Copy A to the IRSCopy A of Form 1099-NEC must be submitted to the IRS by January 31, 2020, either by e-file or by mail. A physical copy of Form 1099-NEC (and other IRS publications) can be requested through the IRS website. If you are opting to file a paper copy, you will also need to provide Form 1096 as a cover sheet. Once both are completed, you can mail them to the IRS. If you want to file electronically, you will do so through the IRS’s FIRE (Filing Information Returns Electronically) System. You must have a software or service provider that will create the file in the proper format—a scanned or PDF copy will not be accepted. Before using FIRE, you will need a Transmitter Control Code (TCC). This must be requested through mailing or faxing Form 4419 to the IRS. This must be submitted at least 30 days before the tax deadline for your Form 1099-NEC. The IRS will contact you with your TCC which can be used to create an account with FIRE. Submitting Copy B to the contractorYou can email Copy B to your contractor, but first you will need their consent. Consent will need to be obtained through the same way you plan to be sending it (e.g. email asking for consent if emailing the forms). If consent cannot be obtained, you will have to mail it. To comply with IRS rules, your request for consent must include the following:
Once you’ve received consent from the contractor, you are free to send them their Copy B electronically. Submitting 1099 forms with your stateSome areas require you to also file 1099 forms with the state. The following states do not require 1099 forms to be submitted:
Some states participate in a program where the IRS will forward relevant forms only if they were filed electronically. Check with your CPA to ensure you are compliant with any of your state’s 1099 filing requirements. How Bench can helpWhether you receive a 1099-NEC or need to issue one to a contractor, having clear, accurate, and up-to-date books are essential when it’s time to file your taxes. Your Bench bookkeeper can provide detailed year-end financial statements, including a 1099-specific report, that make tax filing a breeze. In January, your Bench-provided 1099 report tells you:
We’ll even let you know whether you need to file an NEC or MISC form for that 1099. Learn more. Do I have to report a 1099File Form 1099-MISC for each person to whom you have paid during the year: At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest. At least $600 in: Rents.
Will the IRS catch a missing 1099But will the IRS catch a missing 1099-misc? In short: Yes, they will. The IRS may be understaffed, but rest assured: if you make a mistake or forget to file a 1099-misc form, they will catch it.
What happens if I dont Report 1099 to IRS?IRS reporting
Once the IRS thinks that you owe additional tax on your unreported 1099 income, it will usually notify you and retroactively charge you penalties and interest beginning on the first day they think that you owed additional tax.
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Do i have to file a 1099 misc
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