If you hired an independent contractor for your business in 2019, you will have to understand and complete an IRS Form 1099-MISC for each independent contractor while preparing your taxes. However, if this is your first time working with independent contractors, you may not be familiar with exactly what Form 1099 is, and how it is different from Form W-2. We break down the Form 1099 basics for you below to help you understand the process. If you have any further questions, the professionals at Harding Group can answer any of your small business tax questions.
What is Form 1099-MISC?
Form 1099, Miscellaneous Income, is a form businesses use to report specific payment types, most often income paid to an independent contractor. You may also need to use it to report other income, including rents or royalties.
Form 1099 Recipients
Independent contractors, or nonemployees, use the Form 1099 to make tax payments based on what you paid them. You must send the form to any contractors you paid $600 or more to throughout the year.
Reporting Other Income
You must also file form 1099 if you make any of the following payments in amounts over $600:
- Medical and health care payments
- Gross proceeds paid to an attorney
- And more!
You can check the IRS 1099 instructions for a complete list of payments that you should report on Form 1099.
Filling Out Form 1099-MISC
When you hire an independent contractor, have them complete a Form W-9. You will use the W-9 to complete Form 1099. When filling out Form 1099, you will include:
- The payment type
- Your name, address, and Taxpayer Identification Number
- The recipient’s name, address, and TIN
- How much you paid the recipient during the year
- Any federal or state tax withheld
- Section 409A deferrals or income
Filing Form 1099-MISC
Make sure you send your completed, correct copies to the IRS and the recipient. You must also submit Form 1096 to the IRS, which is a summary form of IRS Forms 1099. You can mail or e-file the forms, but you must e-file if you need to file 250 or more information returns throughout the year.
Maryland participates in the Combined Federal/State Filing Program, which means that the IRS will send your e-Filed 1099 forms to your state.
Form 1099-MISC Copies
- Copy A: Send to the IRS, with Form 1096
- Copy 1: Send to the state tax department, if applicable
- Copy B: Send to the independent contractor
- Copy 2: Send to the independent contractor
- Copy C: Keep for your records
Filing Due Date
If you are reporting nonemployee compensation, the deadline to distribute and file Form 1099 is January 31st. If you are using Form 1099 to report a different type of payment, your due date is February 28th, and if you file the form electronically, your due date is March 31st.
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