The deadline for furnishing the IRS and your contractors with form 1099 is January 31, 2017. Here’s an overview of everything you need to know to make sure you don’t miss the deadline to file form 1099 in 2017.
Ten Ninety What?
There are many variations of form 1099. For example, the IRS has created a separate 1099 form for merchant and credit card payments, one for interest earned, one for the acquisition of secured property, one for payments issued to you by the government, etc. Thankfully, most small business owners only need to be concerned with one type of 1099: form 1099-MISC.
What is Form 1099-MISC?
Form 1099-MISC is the form used to report any non-employee compensation. In other words, it’s the independent contractor’s equivalent of form W-2 (which is used to report all of the earnings an employee made during the year). Form 1099 is provided by a payee to both the IRS and a contractor. If you are a small business owner and have paid a contractor more than $600 in a calendar year, you are required to provide both the IRS and the contractor with a copy of form 1099-MISC by January 31.
Forgetting or failing to send a copy of 1099-MISC to both the IRS and your contractor is an expensive mistake. The penalty for not filing form 1099 on time ranges from $30-$100 per form. Ouch!
Preparing Form 1099-MISC
Before you can fill out form 1099, you’ll need to have several pieces of information handy. First of all, you’ll need your contractor’s personal information, including their name, address, and social security number. All of this information should be available on the contractor’s W-9 form. If you haven’t done this yet, it is a good rule of thumb to require your contractors to fill out a form W-9 before issuing their first payment. You’ll also need to have your EIN (employer identification number) and your business address.
Additionally, you will need to have at your disposal the total amount each contractor was paid in the calendar year. Once you’ve assembled this information, you’re ready to prepare and send out 1099’s to your contractors.
There are several options for filling out and furnishing form 1099-MISC to your contractors and to the IRS. The first, and most direct method, is to download and print the form out from the IRS’ website. Once you’ve filled in the form, you can mail it to your contractors and the IRS directly.
Aside from doing it the ‘old fashioned way’, there are many tools and softwares available to prepare and send form for you. This is especially useful for small businesses who work with a large number of contractors and don’t want to fill out hundreds of forms manually.
Platforms such as 1099Pro are popular among small business owners and entrepreneurs who need a more automated solution to preparing and furnishing form 1099-MISC to their contractors. There are many other solutions out there, though - a quick Google search will give you more than enough to choose from.
Exceptions to Form 1099
There are some instances in which you are not required to provide a form 1099 even if you’ve paid the contractor more than $600 in a calendar year. For example, if your contractor receives payments to their business instead of to their person, and that business is treated as a corporation, then you are not required to provide the contractor with a 1099. Additionally, certain payments made by credit card should not be reported on form 1099 MISC and should instead appear on 1099-K.
If you have questions about whether or not you are required to prepare and provide a form 1099 to your contractors, be sure you add it to your list of questions to ask your account each month.
Remember - the deadline is January 31, 2017. Don’t miss it!