The 1099-MISC form is known as the ?independent contractor? form. Essentially, it is a form filed with the IRS that tells them how much you paid someone during the tax year in question. If you paid a gardener $100 a month for keeping your yard in shape during the year, you would issue a 1099-MISC for $1,200 assuming the gardener wasn't a corporation or LLC. The form is then used by the IRS to make sure the gardener is reporting all the money he made during the year.
The first step in preparing the 1099-MISC form is to get the right form. There are a variety of 1099 forms, so make sure you have the MISC version. Next, you need to get a hard copy, not print it off the web. The form has to be ?readable? by the IRS computers, so you need the official version. You can usually get it at major post offices, big libraries and IRS offices in your area. The IRS office often gets picked over quickly. You can also order it from the IRS online, but it takes time to receive the forms and most usually leave it too close to the deadline for this option.
Actually preparing the form is fairly simple. First, make a copy of the form on your printer so that you don't have to go get another form if you make a mistake. Next, total all the payments you made to the people you need to report to. You will need to prepare a 1099 for each one separately.
On the form itself, you need to enter your own information in the top left box. You should include your name/business name, full address and phone number. Next, enter your tax identification number in the box directly below. Just to the right of that box, enter the tax identification number of the person you are issuing the 1099 to. Below those two boxes, enter the name of the person and their address.
Now it is time to actually enter dollar amounts. Most people are going to deal with the row of boxes running vertically in the middle of the form. The first box is ?1 Rents?. If you need to report rents paid, do so here. If you just paid someone a basic fee during the year for doing some service for you, the number is reported in box 7. It reads ?nonemployee compensation.? This is the most common situation. When in doubt, use this box.
Once you have the returns filled out, it is time to send them off. Ah, but there is another step. The IRS loves forms, so you are going to have to get another hard copy. The form is the 1096. It is essentially a cover sheet that tells the IRS all the forms you are sending in. It is really basic. Just fill in your name and check the box of the forms you are sending, in this case the 1099-MISC box.
So, when is all of this due? You need to send the contractors copy to them by January 31st. The copy to the IRS has to be in the mail by February 28. Why the different times? It gives the contractor time to check their records to make sure your numbers are correct.
The 1099-MISC form is misunderstood by most people. It is not a tax return per se. Instead, it is what is known as an information return. The IRS essentially uses it to track how much revenue an independent contractor pulls in from clients.
A party that pays $600 or more to an independent contractor must file one of the forms with the IRS. There are exceptions to this $600 figure, but this is the general rule. A person issuing the form must send it out to the contractor by the end of the day on January 31st. They then must file the same form with the IRS by the end of February. If you receive a 1099-MISC form, you don't need to do anything with it other than check to make sure the payments reported are accurate. Ah, but what if you do not receive the form?
First off, many people forget to file the form. Since it is an information return, they just don't get around to it or it slips their mind. There is a penalty for failure to file the form with contractors and the IRS, but it is under $100. In short, not enough of a fine to motivate people. If you failed to receive the form, the party in question is probably not ?up to? anything. Furthermore, you do NOT file the 1099-MISC forms you receive with your tax returns, so it is not a critical problem for your own tax return preparation.
If you fail to receive a 1099-MISC form, you still have to report the revenue earned from that business. The fact it was not reported to the IRS does not mean you get a free break. Sorry. You are responsible for reporting all of your revenues regardless of where they came from and whether they were reported to the IRS or not by a third party. You should be able to look at your books and determine how much you were paid from each customer.
Ultimately, the 1099-MISC form stresses out more people than it should. It is a necessary form, but the IRS is not going to be breaking down anyone's door for 1099-MISC problems. If you didn't get all the forms you were expecting, just figure out your total revenues and go from there.
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