The 1099-MISC form is to report the miscellaneous income earned during the 2018 tax year. This is also referred to as “non-employee income” to the Internal Revenue Service (IRS). This is the annual wage report form, this must be prepared, given to the employees, and reported to the IRS for the prior tax year.
Non-Employee Income Reporting on 1099-MISC
The term “non-employee” is used by the IRS, which includes someone who offers their services to another individual or business. This category, includes independent contractors, private contractors, freelancers, and outsourcing companies.
Who Will Receive a 1099-MISC Form?
When you have paid $600 or more to a person other than your regular employee or paid $10 or more royalties during the tax year, you can send the 1099-MISC form to the concerned person, representing the total amount paid for that tax year.
The form 1099-MISC is also used to track the payments to non-employees,
- Independent contractor earned income but not an employee.
- Commissions, rents, fees or royalties paid.
- Payment made for awards, prizes or legal service.
Before receiving a 1099-MISC form a non-employee must complete the W-9 Form, which is similar to the W4 form that every employee completes during the hiring process. This W9 Form will contain the name, contact address, and tax identification number of the taxpayer.
1099-MISC VS W-2 Form
W2 forms are given to the employees as year-end wage and tax reports. A W2 form pictures the gross taxable earning of the employees, state / federal withholding, and FICA taxes.
The 1099-MISC form is for non-employees presenting the payment amounts during the year. In certain cases, there is no withheld taxes and no FICA tax withholding.
Deadlines for 1099-MISC Forms
If you are issuing the 1099-MISC form to a non-employee, it should be submitted to him or her by January 31st of the following tax year.
The 1099-MISC form should be submitted to the IRS by January 31st for the previous tax year. The deadline changes each year. If the deadline falls on a holiday or a weekend, then the deadline is the next business day.
Before Preparing Form 1099-MISC
To start preparing the Form 1099-MISC you need to have the following:
- W9 Form, which is signed by the non-employee, so that you can gather the required information of the individual’s information and also the taxpayer ID number of that individual. When you do not have the ID of the taxpayer or the ID is incorrect, then you must withhold the taxes from that individual’s earnings.
- The total payment you made to an individual for his or her service for the tax year. Note that, when you did not pay $600 or more to that concerned individual during that year, you no need to complete the 1099-MISC form for that person.
How to Prepare and File Form 1099-MISC?
To complete Form 1099-MISC you need to gather the required information about each employee. When you do not have the W9 form signed, you need to obtain it to prepare Form 1099-MISC.
When you need to submit paper copies of the 1099-MISC forms, you may submit it to the IRS with the Form 1096 transmittal form. Ensure to get correct forms for paper filing. But in the case of e-filing, you can submit the 1099-MISC forms easier than the paper filing method. Here you need to submit the 1096 transmittal forms.