Learn when a 1099-MISC form is required, how to obtain and complete it for contract workers, and the deadlines for sending copies to the worker, the IRS, and state authorities.
If you own a business and you pay more than $600 to any freelance or contract worker, you must complete and file a 1099-MISC form to report that payment to the IRS and to the contract worker. A 1099-MISC form is required to report any miscellaneous income that you pay to any non-employee doing work for you. Any payments to a non-employee that are categorized as fees, commissions, rent, royalties, awards, or incentives require your business to fill out the form and submit copies to both the IRS and the contract worker by the applicable deadlines.
- Examine your payments. Before filling out any 1099 tax form, review your finances to determine whether you made payments to any contract worker during the year that exceeded the $600 limit. If you did, make a list of contract workers and the payments made. Also keep in mind royalty payments: if you paid royalties to anyone outside your organization amounting to $10 or more, you will need to complete a 1099-MISC form for that particular person. In any case, make a list of all the people you made payments to, including the total amount paid for the year. This way, you will have a reference file when you work on the forms.
- Obtain the 1099-MISC form. The 1099-MISC form can be easily obtained by visiting the nearest IRS office or branch. If there is none in your area, municipal and state offices will also have the forms available. You can download the form as a PDF file as well. You will need Adobe Acrobat Professional or other PDF writing applications to open and edit the form on your computer. To download the form, visit irs.gov and save it to your computer.
- Fill in the basic information. Write down basic information such as the payer's and recipient's names, addresses, and telephone numbers first. The payer is your business, while the recipient is your contract worker or the person you paid. For the payer's federal identification number, write your employer identification number (EIN) or your business's Social Security number in the box. For the recipient's identification number box, enter the Social Security number of your contract worker.
- Fill in the amounts paid. In boxes 1, 2, 3, and 7, enter the relevant payments made to the recipient. Leave the boxes blank if you did not pay anything related to the label on the box. In this case, you will definitely fill in box 7, since you hired and paid a contract worker.
- Fill in federal or state income tax. If you withheld any federal or state withholding taxes from the total payments you sent to your contract worker, enter the amounts in the relevant boxes. Leave this blank if you did not.
- Send the copies to the appropriate parties. Copy B and Copy 2 of the 1099-MISC form should be sent to the recipient or contract worker no later than January 31 of the year. Mail Copy A to the IRS before February 28. Send Copy 1 to the state tax revenue office where the contract worker resides. Copy C is for your internal records. Make sure to file it properly for future reference.
The 1099-MISC form is a requirement mandated by the U.S. government to report miscellaneous income that a business paid to a person outside of their organization. However, some businesses accidentally or deliberately forget to report these payments to save money and avoid paperwork. Save yourself from an IRS investigation by making sure that you diligently file taxes correctly and on time.
How to Prepare a 1099-MISC Form for a Contract Worker
Learn when a 1099-MISC form is required, how to obtain and complete it for contract workers, and the deadlines for sending copies to the worker, the IRS, and state authorities.
If you own a business and you pay more than $600 to any freelance or contract worker, you must complete and file a 1099-MISC form to report that payment to the IRS and to the contract worker. A 1099-MISC form is required to report any miscellaneous income that you pay to any non-employee doing work for you. Any payments to a non-employee that are categorized as fees, commissions, rent, royalties, awards, or incentives require your business to fill out the form and submit copies to both the IRS and the contract worker by the applicable deadlines.
- Examine your payments. Before filling out any 1099 tax form, review your finances to determine whether you made payments to any contract worker during the year that exceeded the $600 limit. If you did, make a list of contract workers and the payments made. Also keep in mind royalty payments: if you paid royalties to anyone outside your organization amounting to $10 or more, you will need to complete a 1099-MISC form for that particular person. In any case, make a list of all the people you made payments to, including the total amount paid for the year. This way, you will have a reference file when you work on the forms.
- Obtain the 1099-MISC form. The 1099-MISC form can be easily obtained by visiting the nearest IRS office or branch. If there is none in your area, municipal and state offices will also have the forms available. You can download the form as a PDF file as well. You will need Adobe Acrobat Professional or other PDF writing applications to open and edit the form on your computer. To download the form, visit irs.gov and save it to your computer.
- Fill in the basic information. Write down basic information such as the payer's and recipient's names, addresses, and telephone numbers first. The payer is your business, while the recipient is your contract worker or the person you paid. For the payer's federal identification number, write your employer identification number (EIN) or your business's Social Security number in the box. For the recipient's identification number box, enter the Social Security number of your contract worker.
- Fill in the amounts paid. In boxes 1, 2, 3, and 7, enter the relevant payments made to the recipient. Leave the boxes blank if you did not pay anything related to the label on the box. In this case, you will definitely fill in box 7, since you hired and paid a contract worker.
- Fill in federal or state income tax. If you withheld any federal or state withholding taxes from the total payments you sent to your contract worker, enter the amounts in the relevant boxes. Leave this blank if you did not.
- Send the copies to the appropriate parties. Copy B and Copy 2 of the 1099-MISC form should be sent to the recipient or contract worker no later than January 31 of the year. Mail Copy A to the IRS before February 28. Send Copy 1 to the state tax revenue office where the contract worker resides. Copy C is for your internal records. Make sure to file it properly for future reference.
The 1099-MISC form is a requirement mandated by the U.S. government to report miscellaneous income that a business paid to a person outside of their organization. However, some businesses accidentally or deliberately forget to report these payments to save money and avoid paperwork. Save yourself from an IRS investigation by making sure that you diligently file taxes correctly and on time.
How to Prepare a 1099-MISC Form for a Contract Worker
By Howtodotips
Learn when a 1099-MISC form is required, how to obtain and complete it for contract workers, and the deadlines for sending copies to the worker, the IRS, and state authorities.