Tips to Help You Prepare Form 1099-MISC
UPDATE: The deadline for filing 1099-MISC forms and 1096 transmittal forms with the IRS has changed. For 2017 tax return forms, the filing deadline is January 31, 2018. You can find more information in this article about the 2017 annual payroll tax report deadlines.
January is traditionally the time to prepare for the new payroll year. One of those payroll tasks is sending annual reports to contract workers you paid in the previous year.
The form you must send to independent contractors is Form 1099-MISC.
What to Do Before You Send out Form 1099-MISC:
1. Check the year on the tax forms.
The IRS changes these forms every year, so make sure you have the current year's version. The year of the form is the year of the payment, NOT the year you are completing the form. If you are sending a contractor a 1099-MISC form for 2016 work in January 2017, use the 2016 form.
2. Send 1099-MISC to independent contractors, not employees.
Form 1099-MISC is not for employees. It is to be sent to outside companies and contract workers to whom you paid at least $600 for the year. Read more about how to tell which form you should send to someone - a 1099-MISC or a W-2.
After you have determined that the person is not an employee, the next step is to see if you really need to send the 1099-MISC form to that person. Some payees, like corporations, and attorneys, do not need to receive this form.
Make sure you know who should receive a Form 1099-MISC.
3. Make sure you have a Form W-9 for each payee.
Before you send a 1099-MISC to anyone, you must have a W-9 form completed for that person. The purpose of Form W-9 is to verify the person's tax identification number. For an individual, the taxpayer ID might be a social security number.
For a business, it might be an Employer ID number.
It's important to make sure you have this information; if you do not receive a W-9 form from a non-employee, or if the tax ID is not valid, you will be notified by the IRS that you must start backup withholding on payments to that individual.
4. Order 1099-MISC forms and use the correct form.
If you send out your own 1099-MISC forms (year-end tax summary for independent contractors), now is the time to order forms for this tax year. If you have a payroll service, check to make sure they have what they need to prepare these forms in January.
You can get 1099-MISC forms from office supply stores, or from the IRS. You cannot use a 1099-MISC form you download from the Internet because the red ink on Copy A is special and can't be copied. You must use the official form.
5. Check for errors before you submit to the IRS.
Common errors in completing 1099 forms include using the form for the wrong year, not using the correct form, sending the form to the wrong person or company, failing to include all requested information, and other form errors.
6. Record payments in the correct year.
Be sure payments to contractors are recorded in the correct year.
Using the accounting concept of constructive receipt as the date when the person has unrestricted access to the funds is what counts. So, so put payments into the correct year by using the paycheck date.
If you are paying a contract worker for the last week in December, but the check is dated in January, that income counts toward January. Read more about timing checks to contractors and vendors at year-end, as well as other year-end income and expense timing issues.
In January, prepare and distribute 1099-MISC forms and file with the IRS
1099-MISC forms must be distributed to non-employees no later than January 31 of the next year. So 1099-MISC forms for 2015 work and payment must be given to the non-employee no later than January 31, 2016.
Beginning with 2016 forms, you must send copies of all those 1099-MISC forms to the IRS, along with a transmittal form (Form 1096) no later than January 31, 2017.
Read more about how to prepare and distribute Form 1099-MISC.