Chill. Business Tax Experts Answer Everything You Want to Know About Form 1099-MISC
If your business pays nonemployees—like clients or independent contractors—there’s a tax form you should know about.
Meet Form 1099-MISC. What’s the IRS Form 1099-MISC? It is a variant of Form 1099 used to report miscellaneous income. (Makes sense.) One notable use: Form 1099-MISC reports amounts paid by a business to a non-corporate U.S. resident independent contractor for services. (Thank you, Wikipedia.)
The 1099-MISC form can be tricky, but know you’re not alone: KC business owners have a lot of questions about it. But understanding taxes is a must for all small businesses (plus, the right tax strategy for your biz could save you money).
Knowing how, when and where to file this important form is vital: Filing incorrectly or not at all might mean you’ll face a penalty.
So we asked local tax experts Eden Holsman and Melody Green, both IRS communications and stakeholder liaisons, some of your most burning questions about 1099-MISCs to help you wrap things up as the Jan. 31 tax deadline draws closer. Plus, they offered a few pro tips to save you some headaches.
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Do I have to file a Form 1099-MISC?
First things first: Form 1099-MISC is used for reporting purposes only; it’s an information return, not an income tax return. But that doesn’t mean it’s not important: Read on.
If you made a payment during the calendar year as a small business or self-employed (individual), you’ll most likely have to file a Form 1099-MISC to the IRS. For example, if your business paid someone who’s not your employee, like a subcontractor, attorney or accountant $600 or more for services during the year, you’ll need a Form 1099-MISC.
Pro tip: Get Form W-9 (or an acceptable substitute) before you pay the other party (that’s the payee) to get their correct name and tax ID number, or TIN. For individuals, the TIN is generally a social security number. Some payments don’t have to be reported on Form 1099-MISC, but they might be taxable to the recipient. For a list of the exceptions, check out the instructions for Form 1099-MISC.
You’ll have to send a copy of the 1099-MISC to the independent contractor by Jan. 31 of the year following payment (so if you paid for services in 2018, that means you’re on the hook for Jan. of 2019), and you must also report the payment information to the IRS. The Internal Revenue Code and associated regulations require you to file the Form 1099-MISC.
All this tax talk got you feeling a little overwhelmed? Just give KCSourceLink a call at 816-235-6500 or tell us a bit about what you need, and we’ll calculate your next steps for free. There are more than 240 organizations in the KC metro who can help your business, no matter if you have questions about taxes, legal issues, location assistance, franchising, networking or something else. So what are you waiting for? We’re ready to help.
Sounds complicated. What if I file late or I just don’t file my required Form 1099-MISC?
If you file late or if you don’t include the correct payee statements without reasonable cause, you might face a penalty (and, yes, that’s a $$ penalty). Obviously, if you’re supposed to file a 1099-MISC and don’t, you’re asking for a penalty.
1. If you fail to file a correct information return by the due date and you can’t show reasonable cause, you might be penalized. The penalty applies if you don’t file timely, you don’t include all the information you need on a return or you the info on your return is wrong. The penalty also applies if you file on paper when you should’ve filed electronically, you report an incorrect tax ID number or don’t report a TIN, or you don’t file paper forms that the machine can read. How much you’re penalized is based on when you file the return with the correct information.
2. If you fail to include the correct payee statements (those are the statements to the recipient) and you can’t show reasonable cause, you may face a penalty. The penalty applies if you fail to provide the statement by the due date, you don’t include all the information needed on the statement or the info on the statement is wrong. The amount of the penalty is based on when you furnish the correct payee statement. It’s a separate penalty and is applied the same way as the penalty for not filing correct information returns by the due date.
OK, OK. This is important. So what types of payments are reported on a Form 1099-MISC?
Just to hammer this home: You’ll need to submit a Form 1099-MISC if you paid for services as part of your business. That means if as an individual you paid a personal lawyer (or your personal babysitter), you won’t need 1099s for those transactions. If you paid a lawyer to defend your business, you’ll need to submit that 1099. See the difference?
Here are some details about when you’ll need to file Form 1099-MISC for each non-employee 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:
- services performed by someone who is not your employee (non-employee compensation, NEC)
- prizes and awards
- other income payments
- medical and health care payments
- crop insurance proceeds
- cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
- generally, the cash paid from a notional principal contract to an individual, partnership, or estate
- payments to an attorney
- any fishing boat proceeds
Pro tip: Also, use the 1099 form to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
You won’t need a 1099 in certain situations. These exceptions are listed in the 1099 Instructions.
What if I don’t receive a Form 1099-MISC?
Flip to the independent contractor side: Even if you don’t get a Form 1099-MISC, if you received a payment during the calendar year as a self-employed individual, an employee or a small business, you might have to file a tax return to report that income to the IRS. (That includes payment received in the form of money, goods, property, or services.) This is true even if you do it as a side job or just as a part-time business—even if you’re paid in cash.
On the other hand, depending upon the circumstances, some or all of your business expenses may be deductible, subject to the normal tax limitations and rules.
So where do I get a Form 1099-MISC?
Why, at IRS.gov, of course: Online Ordering for Information Returns and Employer Returns
Pro tip: Don’t file Copy A of information returns you download from the IRS website. The official printed version of the IRS form is scannable, but the online version printed from the website is not. You might be penalized if you file forms that can’t be scanned.
Yikes, deadlines! When do I have to file a Form 1099-MISC?
File Form 1099-MISC on or before Jan. 31, 2019
, if you are reporting non-employee compensation (also known as NEC) payments in Box 7 using either paper or electronic filing. For all other reported payments, file Form 1099-MISC by Feb. 28, 2019
, if you file on paper, or April 1, 2019
, if you file electronically.
Pro tip: It’s important to enter the payment in the proper box on the Form 1099-MISC. Refer to the Form 1099-MISC Instructions for more info.
Where do I file Form 1099-MISC?
Form 1099-MISC may be filed electronically via the FIRE System
. Filers who have 250 or more returns must file them electronically.
If your principal business, office or agency, or legal residence (in the case of an individual) is in Kansas or Missouri, send all information returns filed on paper to:
Department of the Treasury
Internal Revenue Service Center
PO Box 219256
Kansas City, MO 64121–9256
Need more help?
● Form 1099-MISC
● Instructions for Form 1099-MISC (HTML)
● Information Return Reporting
● About General Instructions for Certain Information Returns
● Online Ordering for Information Returns and Employer Returns
● Filing Information Returns Electronically (FIRE)
● Increase in Information Return Penalties
If you have questions about information reporting, call 866-455-7438 (toll-free). If you have a hearing or speech disability and have access to TTY/TDD equipment, call 304-579-4827 (not toll free).
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, and we’ll outline your next steps for free.
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