1099 Requirements
As we begin the year, you’re probably not thinking about taxes at all. This is a mistake as deadlines are approaching. Here are the 1099 requirements for independent contractors.
Generally speaking, the IRS requires you to report certain payments you made during the year to independent contractors. The 1099-MISC form is a single page on which you report to total amount you paid to the independent contractor during the tax year in question.
The 1099-MISC forms must be issued to any person you paid at least $600 in rents, services or other income payments. For example, if you hired a contractor to renovate a room in your home and paid them $5,000, a 1099-MISC filing would be required. As with practically any IRS filing, there are additional situations that require a 1099 filing. Any payments to attorneys must be reported regardless of the amount. Royalties totaling over $10 also must be reported. Generally, you are not required to report payments to a corporation.
1099 Filing Requirements
The 1099-MISC form is a multi-layered carbon form, so make sure the information you provide appears clearly on all of the copies. Once you fill out the form, provide Copy B to the person you are reporting to the IRS by January 31st.
Copy A of the 1099-MISC form is intended for the IRS. You must file it by February 28th if you are sending the form by mail. If you prefer to file electronically, you have until March 31st each year.
The IRS has made a major effort to cut down on red tape, but you’ll still find it with 1099-MISC filings. In addition to filing the 1099 with the IRS, you must also file a 1096 form. The 1096 form is the “Annual Summary and Transmittal of U.S. Information Returns” form. It is one page and extremely easy to fill out.
Although the IRS has an excellent web site, you can’t download 1099 forms off of it. The official forms are still multi-layered carbon paper, which means you need to get a physical copy. The IRS should send you the forms in the mail. If they don’t, you can order them off the IRS site or call the IRS to have them sent to you. If all else fails, you can usually find the forms at major post office and public library locations. If you fail to file 1099s, the IRS will penalize you $50 per 1099.
More than a few people have grumbled about dealing with 1099 requirements so early in the year. Still meeting the requirements helps get you organized for filing taxes in the next few months.