So what Is a 1099-Misc form?
One of the most essential tax forms when filing a return for an Independent Contractor is a 1099-Misc form. 1099-Misc forms are used to report payments for trade or business services to and individual or businesses, for services received or rendered. Common examples for form 1099-Misc issuance include:
- Payments for services related to repairs & maintenance, (if any part of the payment was for services, you must report the total amount), cleaning, accounting, commissions, exchanges of services (barter), consulting, etc.
- Legal fees, including those paid to a corporation.
- Rent and lease payments you have made, unless paid to a real estate agent or a corporation.
- Outside contractors and non-employee compensation of $600 or more.
- Payments of interest to individuals, including the shareholders of your company if you are a corporation or LLC.
For example, If you paid any individual or company that is not a corporation over $600 for services in 2015, then a 1099 form needs to be issued to that person or entity.
These forms must be issued to recipients and the Internal Revenue Service, typically by the end of January each year. There is a penalty associated with late filing or a failure to file. So make sure you issue your 1099-Misc forms in a timely manner.
Note: The chance of audit remains small, but we’ve learned through our dealings with the IRS that they have made it a point of emphasis to review 1099 compliance during each audit. They are strictly enforcing failure to file penalties, and more problematically, back-up tax withholding at 28% in cases where 1099s were not filed.
What do you need to prepare these 1099-Misc forms?
Each service provider needs to complete a form W-9, Request for Taxpayer Identification Number and Certification. You should obtain updated W-9 forms every two years for ongoing contractors. You will need contractors to complete this form using either their social security or entity identification number. Do you need an EIN (Employer Identification Number)? Apply with the IRS HERE.
If you would like us to prepare your 1099s call us asap! to ensure their timely preparation and mailing. If our office currently does your bookkeeping, we will be able to we may still need contractor addresses, social security or entity identification numbers.