With all of the forms available from the IRS, it can be difficult at times to know which form to file and when. Generally speaking, the 1099-MISC form is for independent contractors or freelance workers seeking to report their earnings to the IRS, but there are several other situations in which to use this form. Here is a quick overview of IRS 1099-MISC.
Form 1099-MISC Requirements
According to the IRS website, a company should file form 1099-MISC for each person to whom they have paid during the year:
1) At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest
2) At least $600 in rents, services (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, or, generally, the cash paid from a notional principal contract to an individual, partnership, or estate;
3) Any fishing boat proceeds; or
4) Gross proceeds of $600 or more paid to an attorney.
There are times, however, when an IRS 1099-MISC form is not necessary. These cases include, but are not limited to, the following:
1) Payments to a corporation.
2) Payments for merchandise.
3) Wages paid to employees.
4) Military differential wages paid while the employee is on active duty.
5) Business travel allowances paid to employees.
6) Cost of life insurance.
7) Payments to a tax-exempt trust.
In general, in order to file 1099-MISC online, you need to be paying a person who is not your employee for goods or services (a freelancer or contract worker). If the person you have paid is an actual employee of your company, a W-2 is the appropriate document to use.
Preparing the Form
If the IRS 1099-MISC form is appropriate for you, there are many options when it comes to actually prepare the document. Perhaps the simplest way to do so is by purchasing software that can prepare it for you and then E-filing with the IRS. There are many companies that provide this service for reasonable prices, and there are many advantages to E-filing IRS 1099-MISC, including greater efficiency, less chance for error, and quicker processing times.
If you have a contract or freelance workers performing services for you or your company, remember to file 1099-MISC if you paid them at least $600. This is the form that they will be looking for at the beginning of the tax season, and, as is always the case when dealing with the IRS at tax time, time is of the essence. Make sure that you get your 1099 forms completed and filed on time, and don’t forget to sign and date them in order to avoid unnecessary and unwanted penalties and fees. Happy filing!