A Small Business Owner’s Guide to the 1099 Form

You are probably very familiar with your revenue, cost of goods sold, profit, etc.

But there are other numbers that will soon become second nature—and those are numbers associated with taxes and tax forms. A key one is the 1099 form. If you’re wondering where to get 1099 forms and other details, here’s everything you need to know about 1099 MISC forms.

What is a 1099 form?

If you are a small business that has salaried employees and never uses contractors, you can stop reading now. That’s because your employees will be receiving a W-2 tax form, rather than a 1099 tax form, which is specifically designed for independent contractors.

The 1099 form is officially known as a 1099-MISC form, with “misc” standing for miscellaneous. But it’s easier to remember what it’s for if you use the other name it’s often known by—“non-employee compensation.” That’s the name of the actual box on the 1099 form where you will officially fill in the amount you are claiming.

Chances are good that you might at some point need the 1099 form, since many small businesses either hire part-time associates whom they pay hourly or contract with freelancers, such as graphic designers or social media experts, to augment their own team.

How do I Know Who Needs a 1099 Form?

If you have paid any part-time workers or freelancers more than $600 during the year, you will need to send them a 1099 form. The form serves two purposes: It allows you to report this wage information to the IRS and also allows your associate to do his or her taxes.

While the most common use of the 1099 MISC form is for wages to non-employees, it has other uses too.

You’ll need to fill one out to record payments of more than $600 in categories such as:

  • Any non-employee compensation, which might include commissions to salespeople who are not employees, reimbursement for expenses and bonuses
  • Rents
  • Prizes and awards
  • Attorney fees
  • Medical and healthcare payments

And probably less useful, but good to know:

  • Crop insurance proceeds
  • Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
  • Fishing boat proceeds

Finally (and no, it’s never easy to summarize IRS rules!), it should be used if you paid at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest; and if you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

Where Can I get 1099 MISC Forms?

If you are filing electronically, you will use the form online. (Pro tip: You can file your 1099s online with QuickBooks for the easiest filing ever.)

But if you plan to send in the 1099 form via mail, these forms must be ordered in hard copy format; they cannot be downloaded from the website, they are only available for informational purposes. You can also order printed 1099 forms directly from QuickBooks or get them from an office supply store.

Before preparing the form, you’ll need to collect W-9 tax forms, which is the equivalent of the W-4 forms that employees complete. It contains all the contractor’s identifying information, including their tax ID number.

How do I File the 1099 Form?

The form detailing any wages you paid in the previous calendar year must be submitted to the payee by January 31 and the IRS by February 28 if you file on paper and by April 1 if you file electronically. That’s why you’ll find that it’s a multi-part form:

  • Submit Copy A to the IRS and Copy 1 to your state tax department.
  • Send Copy B and Copy 2 to the payee, who will use them for filing federal and state tax returns.
  • Keep Copy C for your records.

The easy way to submit 1099-MISC to the IRS is online, using the Filing Information Returns Electronically (FIRE) system. However, before you are approved to use the system, you’ll need to file IRS Form 4419, which is your application to file electronically, at least 30 days before the due date of the 1099s. (Have questions? Read the requirements for filing with the FIRE system.)

And, even easier, QuickBooks can help you e-file your 1099 forms pronto.

Otherwise, you can mail in your 1099s, but if you choose this option, you also must submit a transmittal Form 1096, which you’ll use to summarize all the tax forms you are submitting for each category. (Note: 1096s are not required if you e-file.)

What if I Need to File a 1099 Correction?

Even the IRS understands that mistakes can be made, and their 1099 correction procedure is surprisingly easy. If you filed via paper, you can make the 1099 correction on a new form and check the “Corrected” box at the top of the tax form.

If you filed electronically, you will need to make your correction via paper form (which, yes, will trigger Form 1096 described above). For more specific directions, consult your tax preparer or call the IRS at (800) 829-3676.

Filing taxes can be a project, but QuickBooks makes it easier than ever to handle your payroll and other accounting procedures, including filing 1099 forms. Find out more about how QuickBooks can automate this entire function today.

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