1099-MISC: A Quick and Simple Guide
No woman in business is an island, nor should they be. There’s a good chance you’ve hired someone to do something in your business. Be it marketing, a virtual assistant, or a bookkeeper.
And if you’ve hired someone to help you out you might need to file a 1099-MISC tax form with the lovely folks at the IRS. Questions about this tax form are common this time of year so here are the basics.
What is the 1099-MISC?
This is an informational form that tells the IRS when payments have been made in the course of business. It helps the IRS to keep track of who should be reporting income. If I fill out a 1099-MISC for my copywriter, then the IRS knows that she had income from me and what she reports as income on her tax return has to at least equal the total of all the 1099-MISCs reported for her.
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Who needs to file a 1099-MISC?
A 1099-MISC must be filled out for each person whom, during the course of business, you have paid during the year:
At least $10 in royalties or
At least $600 in
- Rents
- Services performed by someone who is not your employee (including parts and materials)
- Prizes and awards
- Other income payments
- Medical and health care payments
- Crop insurance proceeds
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
- Generally, the cash paid from a notional principal contract to an individual, partnership, or estate
- Payments to an attorney.
- Any fishing boat proceeds
There are some exceptions to this list so make sure to check out the official IRS instructions.
Note that this form is only filed by a business, not by an individual person. For example, I personally paid someone to paint my house a few summers ago. I do not have to send him a 1099-MISC because I paid for that personally, my bookkeeping business did not.
It’s also important to note that a 1099-MISC does not need to be filed if payments were made by credit card or through a third party processor (Paypal, Stripe, Square, etc.). They will receive a 1099-K from their payment processor if they’ve met a certain threshold. Only payments made by check, cash, or ACH need to fill out the 1099-MISC.
There is some debate out there as to whether or not a 1099-MISC has to be filed if payment is made by credit card so you might hear some conflicting advice on this. It won’t hurt to file one either way, but you do have to pay to file each form. The decision is up to you. Below is the guidance from the official IRS instructions.
“Form 1099-K. Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC.” https://www.irs.gov/pub/irs-pdf/i1099msc.pdf
How to file a 1099-MISC
The 1099-MISC is different than many tax forms because it can’t be filled out with any old paper. The IRS will not accept a self-printed 1099-MISC as it will with other tax forms. There are special 1099-MISC forms that you can purchase from the IRS themselves or from most office supply stores.
You can also file your forms online through services such as Intuit (the makers of Turbo Tax) or through this service, ran by Office Depot. There are plenty of other options out there so shop around. When picking a service look for someone reputable and for a good price based on the number of reports you need to file.
Make sure throughout the year that you are collecting the proper information to be able to file this form. This is done by asking for a W-9 when you start working with someone.
Note that the W-9 wants a Tax Identification Number if you have not registered to get an Employer Identification Number for your business this means you have to give the requester your Social Security Number. Yikes! The process to get an EIN is quick and simple. I recommend doing it immediately.
When to file a 1099-MISC
The 1099-MISC is due by January 31st. This includes sending it to the IRS and to the person you’re filling it out for. Most electronic filers will file it with the IRS, the state, and send it to the person for you, but make sure that this is included.
There you have it! Basics on the 1099-MISC form.
Have questions? Shoot me an email here.
