Small businesses must send out 1099-MISC reports to almost everyone they do business with. The form is given to non-employees, like independent contractors and other business entities paid by your business. The 1099-MISC form must be provided to any individual or business to whom you paid $600 or more in the tax year. In addition to all non-employees you have paid, make sure these are provided a 1099-MISC form as well:
The form is also used to report direct sales of at least $5000 of consumer products to a buyer anywhere other than the permanent retail establishment. Additionally, backup withholding is also reported on the 1099-MISC.
To prepare the 1099-MISC form, you will need to calculate the total amount paid for each vendor for the past calendar year.
For each 1099-MISC you prepare, you will need to include the following information about your business:
You will need all of the recipient’s ID numbers, meaning either the SSN or the Federal EIN for all forms. You will find this on form W9 that you (should have) collected from your contractor prior to hiring them.
The following are all of the boxes on the 1099-MISC form to be filled out where appropriate with the correct payment amounts:
Boxes 15a and 15b require you to record Section 409A deferrals and income. Section 409A refers to a section of the Internal Revenue Code which has to do with non-qualified deferred compensation plans. Check with your CPA if you think you may have to report non-qualified deferred compensation to one of your contractors.
Boxes 16, 17 and 18 require you to enter state and local information. The form allows you to enter information for up to two states. An additional form must be filled out if more than two states are needed. Here you must enter the State Withholding Tax (box 16), the State/Payer’s State Number (17), and the total State Income (18). Unless you withheld state or local income tax from the payments made to the contractors, boxes 16-18 will be blank. The 1099-MISC is a multi-part form and clearly labeled. Be sure to send the correct forms to the correct location.
When you have completed all of your 1099-MISC forms, you must prepare and submit a Form 1096 to the IRS. Form 1096 totals all the information from the 1099 forms. The information in this guide is designed to walk you through the process of filling out a 1099-MISC form. If, however, more questions or concerns arise, contact your CPA or tax professional. Additionally, you can contact Founder’s CPA for a free consultation.