Form 1099 is used to report income to the IRS. Learn who has to file one, when to report and which one you should use.
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.