Get your clients to report your freelance income using Form 1099 on time
Independent contractors are responsible for reporting all income to the IRS, whether or not you received the right forms from your clients. 1099 forms are used to report income to the IRS. This article will help prod your clients to file their 1099 forms.
Who has to report/file form 1099?
Companies/Employers who made payments of $600 or more to independent contractors who provide trade or business services.
When to report?
If the following four conditions are met, you must generally report a payment as nonemployee compensation.
- You made the payment to someone who is not your employee;
- You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations);
- You made the payment to an individual, partnership, estate, or, in some cases, a corporation;
- You made payments to the payee of at least $600 during year.
Which 1099 form should you use?
Typically, you will receive or file the 1099-Misc form to report income from independent contracting / freelancing. If you have hired contractors you will need to file 1099s and if you are contractor you may receive 1099s from the companies with which you did business.
For other sources of income, though, you will need to use other 1099 forms. There are many other types of form 1099s to report income such as cancellation of debt, dividends, or income from interest.
State laws on form 1099
State laws differ on when a business is required to file a 1099. For example, some states have a limit on the amount of income an individual can be paid as 1099 income from a single business to prevent businesses from avoiding paying taxes and benefits to “employees” by paying them as independent contractors. Be sure to check with your accountant for your state’s policies.
Where to get form 1099
If you are filing your 1099s and 1096 by paper, you must file red scannable copies of the forms with the IRS. These red forms can be obtained for free from the IRS by mail (the forms may be ordered online or by calling 1-800-829-3676) or at your local IRS office. You can also buy red forms at your local office supply store.
Also note, do not use a felt tip marker, as the machine scanner cannot read that type of ink.
Important dates to remember
- January 31, 2008 — deadline to give Copy B of Form 1099 to the recipient.
- February 28, 2008 — deadline to file with the IRS Copy A of Form 1099 as well as Form 1096.
- March 31, 2008 — deadline to file forms electronically.
This is presented as general information only and should not be construed as tax advice. If you need help with filing your forms or other accounting help, please contact Heather Villa.
Copyright © 2000-2009
6:27 am
“Important dates to remember.
January 31, 2008. Deadline to give Copy B of Form 1999 to the recipient.
February 28, 2008. Deadline to file with the IRS Copy A of Form 1999 as well as Form 1096.
March 31, 2008. Deadline to file forms electronically.”
Just a curiosity question…
Above you reference Form 1999. Is that accurate or is it supposed to be Form 1099?
Cheers!
—Jeff
1:33 am
Jeff – Typo on my part! Thank you – it is fixed. I would hate to have had a bunch of people out there looking for a 1999 form!
-Heather
3:25 pm
Hi:
If I do some 1099 work for a client in February, when does the client report this income as earned? In other words, does the IRS know in which month I earned this income or is is just reported as earned during the year with no date associated with it.
Thanks
3:29 pm
Lynn,
If you do work with a client in February the IRS will not know about it until the following year.
For example – you work for ABC Services in February 2008 and receive $1,000.00
In January of 2009 (required by law prior to January 30th 2009) ABC Services will issue you a 1099 and file a 1099 with the IRS for the services provided in the 2008 year.
It will not be month specific, only year specific.
Also there is no interim reporting, only annually.
Hope that helps.
-Heather
10:56 am
Does the 1099 have to be in the independent contractor’s hands by the deadline (in this case 2/2/09) OR can I have it postmarked on Feb. 2?
Thank you.
11:03 am
Pat,
Postmarked by 2/2/09!
11:22 pm
Hi Heather,
If a company is incorporated and operates in Canada, but pays an independent contractor based in the US for services rendered, does the Canadian company need to file the 1099?
Thanks.
11:43 pm
Robert,
No the Canadian company does not need to file a 1099, unless you have a US FEIN (Federal Employer Identification Number).
Best,
Heather
7:09 pm
Hi Heather,
Do I have to file a 1099 for a caregiver that I’ve employed for my mother? Would this be considered a personal expense and thus exempt us from having to file a 1099?
Thanks.
7:14 pm
Barbara,
While you are right about it not being a business expense – I cannot answer your questions without knowing more about the situation. Is this caregiver a registered nurse or equivalent?
7:43 pm
No — she’s not a registered nurse.
7:47 pm
Barbara,
Then you should be filing a W-2 for her and should have withheld FICA throughout the year. Please see the details for domestic worker classification here: http://www.hrresource.com/articles/view.php?article_id=1019
8:00 pm
Thank you Heather. I’ll check into this further.
12:19 pm
What happens if you do not receive the 1099 by the deadline date or never receive it?
12:42 pm
Neil,
You don’t need your 1099 to file your freelance income. You just report your income on your Sch C in the revenue section. While they should have sent it and you should have received it as long as the amount is included in your Schedule C revenue filing, there will be no issues on your end.
2:45 pm
What happens if I didn’t keep and accurate record and was going to rely on the 1099? Since the IRS never receives the 1099 or any other number, my guesstimate should be good enough right?
2:47 pm
Guesstimates are never good enough for the IRS. Just because you did not receive, does not mean that the IRS did not receive their 1096 notification. In this case, I would call the company who should have issued the 1099 and ask if they have your Box 7 number as reported to the IRS.
3:14 pm
how does the IRS get a 1096 if the company didn’t take my information?
3:15 pm
They can file a 1096 with just your name and place that they did not have SSN/TIN data.
3:57 pm
Thanks Heather. I’ll continue to research the matter.
According to the IRS if the employer files the 1099/1096 without furnishing me a copy they are in violation of the law. Hopefully they will furnish me a copy as we are already in Mid Feb.
3:59 pm
Neil, you are right. But it could have gotten lost in the mail, they have the wrong address etc. You not receiving a 1099 does not mean that they have not or will not file one. I am just advising you that as long as you report your entire income on Schedule C you will be fine.
4:14 pm
I know my concern is they report a different number than my records. It is a major bank that went bankrupt last year and got folded into another major bank so I have no one to contact their and have had bad experiences with banks making mistakes.
10:40 am
Does the employer report the entire amount paid on the 1099 including reimbursed expenses, or are the reimbursed expenses supposed to be backed out first? And if the employer does not provide a 1099, do I report the total amount received or the amount, less reimbursed expenses? If I report the amount less reimbursed expenses and employer reports the full amount then will this raise an IRS alert? Thank you.
1:00 pm
It can work both ways and depends on the employers accounting system. However, if they report with reimbursed expenses, then you are supposed to claim the reimbursed expenses as deductions (office supplies, etc.). If they report without reimbursed expenses, then your reimbursed expenses should not be deducted on your end.
Depending on the differences, yes it could raise a red flag.
11:36 pm
Heather Villa’s comment says it all in a nutshell. “Depending on the differences, yes could raise a red flag”. This can cause audits, and is unecessary grief for the independent contractor who was not provided an accurate form from the company who paid for services rendered. In my case, I kept very accurate records and had a house fire. Thus, was dependent on the vendor having their chit together and sending me in a timely manner. I asked them to send me one, they didnt respond to my multiple emails, and just now requested address and ss# to resend. Now i have to hault my accountant from completing and wait for the info (pain in the arse). If a major business is that irresponsible, and there is no record after documented diligent attempts, then that company should be severely punished so the same mistake isnt made ever again.
4:45 am
On the 1096 form it said to file by March 02, 2009 with forms 1099, 1098,or W-2G. What is the penalties if I missed the dead line date to file the 1096 and 1099 forms? I did not realize that issue until today (March 03, 2009).
12:20 pm
There are ‘penalties’ determined by the IRS. in 10 years of practice I have only ever seen one imposed. Just complete and get in asap.
9:35 pm
I submitted 1099’s to two independent contractors by the deadline (which was February 15 this year?!) However, I neglected to mail the Copy A & 1096 transmittal by March 2nd. OOPS! – Can my accountant electronically file my Copy A’s & 1096?
She typically electronically files my return.
Thanks
9:39 pm
Caroline,
Yes 1096’s can still be electronically filed.
Thank you,
Heather
6:17 pm
Dear Heather,
As of this date – 3/30/09 I havent receive the 1099 from my employer yet. Am I the one who should report my 1099 income to IRS or my employer? Will I be penalized because as you said it should have been submitted to IRS latest March 2, 2009.
Thank you.
chatty
7:12 pm
Chatty,
Your employer has the obligation to provide you with a 1099. Whether or not you received it does not release you from the obligation of reporting the income on your revenue line in your Schedule C.
5:21 pm
[...] 1099 Forms This is the IRS form to fill out when reporting your freelance/contractor income. If you’ve earned more than $600 from your employer for your freelancing/contractor services, the employer has to file a 1099 form. For more information about this, I found this really helpful site: FreshBooks.com – Get Your Clients to Report Your Freelance Income Using Form 1099 On Time. [...]
12:42 pm
If the employer ignor to issue 1099 for outside labors over $600.00 , What legal libality, and how irs recongize that.
please advise.