How to File IRS Form 1099-MISC Without an EIN
The Internal Revenue Service (IRS) requires businesses to issue Form 1099-MISC to individuals and businesses that earn more than $600 for goods and services. You will need to gather certain information about the individuals and businesses that contract with you to prepare Form 1099-MISC properly.
Important among this information is the business' or contractor's Employer Identification Number (EIN). The EIN is their tax identification number, much like the social security number is an individual's tax identification.
You do not need to have an EIN if you are an individual contractor or freelancer—but you can get one. If you hire someone to assist you in your freelancing efforts, you will need to file for one if you think you might pay them $600 or more in a year.
Explanation of an EIN
The IRS defines an EIN as a “Federal Tax Identification Number" that is used to identify a business entity. Generally, businesses need an EIN. In simpler terms, consider an EIN to be a substitute for a social security number. It is a unique number assigned to these entities for identification purposes.
Obtaining an EIN
The process of obtaining an EIN is straightforward. You can apply for one based on the type of entity you have established. You should obtain an EIN before hiring anyone, or before issuing payments. This would ensure that you have all of the information you need to prepare your Form 1099-MISC and have your employees fill out their paperwork.
To obtain your contractor's EINs (if they have them), have them complete a W-9, which is a form titled “Request for Taxpayer Identification Number and Certification." It is good business practice to have all new contractors and businesses complete new vendor or hire packets as soon as possible.
These packets should include documents such as a personal or business information sheet, a contract, and the W-9.
If You Don't Have an EIN
If you are a sole proprietor and do not have an EIN, you are required to complete the 1099-MISC if you have contracted other entities and meet the filing threshold of paying $600 within a year.
A formal request to the subcontractor for their EIN should be done before the end of the tax year in question. If you still don't have the EIN by the filing deadline, leave the identification number box empty, but still submit the report to the IRS.
The IRS will send a notice stating that the number is missing, and this must be sent along with a backup withholding notice and W-9 form to the subcontractor. It notifies the subcontractor that they will be subject to withholding until the identification number is submitted.
While the individual or business can be subject to a penalty for refusing to provide an EIN, you also can be subject to a penalty for not submitting fully completed forms by the deadline.
Penalties for Not Filing Form 1099-MISC
Small businesses with less than $5 million in gross receipts can be fined $50 per instance if filed within 30 days of the due date. If it's more than 30 days late but submitted by August 1, the penalty is $100 per entity. If it is later than August 1, the penalty increases to $270 per 1099-MISC; and completely disregarding the forms can result in fines of $540 per instance.
It's a good idea to review the 1099-MISC filing requirements with your tax professional prior to filing. The filing threshold is subject to change, so be sure you know what it is at the time that you are filing to ensure you are in compliance with this requirement.