Need to File Form 1099-MISC?
Here’s what you need to know about the 1099-Misc form.
Today’s workplace has exploded with new norms. One of the rising trends in work roles that has warranted much attention from its growth in the past 10 years is freelancing. According to Score, freelancers now make up 36% of the U.S. workforce. Much of a freelancer’s work is done for and with small businesses. We applaud both the tenacity of the freelancers and the flexibility of the business owners to approach a different working model.
However, it’s still important to take heed when handling the taxes for this type of working relationship. As a small business owner, you may have decided to hire out to freelancers because it decreases your tax liability and peripheral expenses. This is true. But that doesn’t mean you have no responsibility.
The IRS requires you send a form 1099-MISC to all freelancers or subcontractors to whom you have paid money for most any type of services.
Here are a few important facts to know about the 1099-MISC form that must be prepared by the company that has hired the freelancer or subcontractor.
When is the Form 1099-MISC due?
You must have the form 1099-MISC properly filled out and delivered to the recipient by January 31, 2020.
Who should receive a Form 1099-MISC?
While more explanation and exceptions exist, the short of it is any person or business to whom you paid $600 or more for services during 2019 should receive a Form 1099-MISC from you. But it’s important to note, this is only for non-employee compensation. Employee payroll is handled differently.
According to the IRS, you must send a 1099-MISC form to non-employees to whom you have paid at least $600 or more for:
- Services performed by someone who is not your employee
- 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
- Payments to an attorney
- Any fishing boat proceeds
- Generally, the cash paid from a notional principal contract to an individual
- Payments of royalties of $10 (notice, this is not $600) or more during the year
Where to get the 1099-MISC forms
You cannot simply download and print the 1099-MISC forms off the internet. The red ink used for Copy A is special and cannot be duplicated on your printer. You can get the forms from some office supply stores, the IRS, your accountant or most business tax software programs.
How to prepare a form 1099-MISC
The most important thing you must note for your 1099-MISC form preparation is that you must have a valid tax ID for that individual or business. This means you will need to get a W-9 form from each payee. This form will contain their name, address, and taxpayer ID. Amounts paid then must be filled in the corresponding box according to the type of service or sales they provided.
How 1099-MISC forms are distributed
The 1099-MISC forms have multiple parts, and it’s important to know which one goes where.
- Copy A is sent to the IRS.
- Copy 1 is sent to the state tax department.
- Copy B is for the payee.
- Copy 2 is for the recipient to file with his/her state income tax return.
- Copies B and 2 must be received by the payee no later than January 31.
Notes about 1099-MISC forms
Make sure you have the correct 1099-MISC form that says 2019. In 2020, the form will be changing; for pay to independent contractors, you will use 1099-NEC form. But again, that will be for year 2020.
As with all tax matters, it can be complicated. This article provides only a small snapshot of information for filling out your 1099-MISC forms. Always talk to a tax professional for your tax questions.
At Perry & Associates, we can quickly and efficiently handle your form 1099-MISC filing. Give us a call today to set up your initial consultation to handle this and any other tax services you may need.