Your Guide To Preparing A 1099 Form
When it comes to handling small business taxes, every detail is essential. That’s why so many small businesses rely on Numerico to prepare their taxes and all the other documents that go hand-in-hand with taxes, such as the 1099 form. The experienced accountants at Numerico don’t miss a single detail. Whether that means issuing a 1099 tax form or handling multi-state tax filing, they will have you covered.
You can take care of all the details to ensure 1099 employee forms get sent out, but do you want this distraction? Running your business is your specialty. Taxes are Numerico’s specialty. Let our professional accountants take care of all your tax needs.
What is a 1099 Form? | How Does a 1099 Work?
At its most basic, a 1099 form is simply a record that someone other than an employer-paid you money. The payer must create the 1099 form and send copies to the compensated person or entity and the IRS. There are several types of 1099 forms, including the 1099-MISC, which is commonly used for payments to contractors and freelancers.
There are 20 different types of 1099 forms and various reasons why you might receive one. The 1099-MISC is well known to contractors, but beginning in 2021, the IRS asks businesses to create a 1099-NEC for contractors and freelancers. The 1099-DIV for stock dividend payments is also quite common, as is the 1099-INT for interest payments.
If you are required to create 1099 forms for your contractors, but find the whole process too much of a burden, let Numerico help. Contact us today to talk about your tax preparation needs.
Who Gets a 1099 Form? | When is a 1099 Required?
The person responsible for creating and sending the 1099 form must send them no later than January 31 each year. Once received, taxpayers use the 1099 form to complete their annual tax returns. The IRS also receives a copy so they can match their records with the taxpayer’s reporting.
Since there are so many types of 1099 forms, many different people receive them. Anyone who received some income from any source other than their employer can receive a 1099 form. Many people receive several each year. According to the IRS, a 1099 is required for self-employment income, dividend and interest payments, debt cancellation, payments from retirement accounts, and other non-employment income.
How To Issue A 1099 Form
Issuing a 1099 form to a contractor you paid doesn’t have to be too confusing. According to the IRS 1099 instructions, you’ll need to gather the following information:
- The total amount paid to them during the tax year
- Contractors legal name
- Contractors address
- Contractors taxpayer identification number
Whenever you hire a contractor, you should have them fill out a W-9 form. This form will have all the information you need to issue a 1099 later. Then check your bookkeeping records to determine the total amount paid to the contractor during the tax year.
Once you have all the information, you’ll fill out a 1099-NEC. Part A gets sent to the IRS, and part B gets sent to the contractor. This needs to be done no later than January 31.
Numerico | Your 1099 Experts | Certified Public Accountant in Livonia, MI
The instructions above are simply for the 1099-NEC. There are additional requirements from the IRS based on whether you file this form electronically or physically. While the process isn’t difficult, it can be time-consuming and expensive if you miss a step.