If you have a business, you may occasionally hire non-employee people to provide services. You provide W-2’s to your employees and 1099’s to your contractors or outside resources (and rents paid). 1099-Misc is the most common 1099 form used, but there or various 1099 forms depending on your business, your accountant, CPA or tax professional will be able to give you proper guidance.
You provide a 1099-Misc to contract workers or service providers that are over $600 dollars. There are certain rules and provisions regarding LLC’s, Corps, and Sole Proprietors, again follow up with your accountant, CPA, or Tax Preparer. Don’t forget your 1096 transmittal form when you send your copies to the IRS.
How Do I Prepare and File a 1099?
Follow these steps to prepare and file a Form 1099:
- Obtain a blank 1099 form (which is printed on special paper) from the IRS or an office supply store.
- Fill out the 1099. Each Form 1099 comes with 5 copies, so make sure to write or type on the top copy so it transfers down onto each copy, like carbon paper.
- Send Copy A to the IRS, Copy 1 to the appropriate state tax agency, Copy B and Copy 2 to the income’s recipient (they get two copies so they can attach one to their return and keep one), and keep Copy C for your records.
- After you have filled out all of your 1099 forms for the year, you need to fill out a Form 1096 as well. Form 1096 summarizes all of your 1099 forms and is filed with the IRS. The mailing address is on the last page of the Form 1096 instructions.
Many (most) accounting software packages have a built in 1099 function. When you set up a new vendor, make sure to input the appropriate information and your year end 1099 task can run a lot smoother. You can still process your 1099’s at year end with software such as Quickbooks with a bit of extra work, we recommend doing the vendor set up, mapping and maintenance throughout the year to minimize your year end headaches, you already have enough to focus on.
“Filing date when non-employee compensation payments are reported in box 7. Public Law 114-113, Division Q, section 201, requires you to file Form 1099-MISC if you are reporting non-employee compensation payments in box 7 on or before January 31, 2017, using either paper or electronic filing procedures. For all other reported payments, file Form 1099-MISC by February 28, 2017, if you file on paper, or April 3, 2017, if you file electronically.” – www.irs.gov
Additional Information: www.irs.gov/1099Misc
Employers – Tuesday, January 31, 2017 is the deadline to send out W-2’s to your employees. You can process your employee’s W-2 forms with your payroll service (most common practice), accountant or tax preparer. W-2 forms mailed to employees must be postmarked no later than January 31st. If your process and procedure is to provide electronic access to the employees W-2’s (many payroll services provide this service), then access to that information has to be no later than January 31st as well. Make sure all communications are clear with your payroll service and your employees.
You may be a small company with only one or two employees and you process payroll in-house, you can utilize the SSA website to process and file forms electronically, or for anyone seeking additional information. www.ssa.gov/employer
Employers are also required to file form W-3 (Transmittal of Wage and Tax Statements) along with Copy A of all W-2 forms issued for 2016 with the SSA.
Employees – You will need the information from your W-2 to submit your tax returns. If you do not receive your W-2 form from your employer by the 7th of February, follow up with your employer immediately. Upon receipt of your W-2, cross check the information against your final paycheck for 2016 to make sure your Year to Date (Year End) numbers match. If there is any discrepancy, follow up with your employer immediately. Also, double check your social security number; a simple typo of one number can cause a whole lot of headache if not caught on time.