Form 1099 is the tax return form businesses use to report payments made to independent contractors to the IRS. These reports help the IRS ensure that contractors pay all of their required income and self-employment taxes. Whenever your business pays an independent contractor more than $600 for their services in the course of a single tax year, you are required to file Form 1099.
Note: The IRS has multiple 1099 forms. These are used to report different kinds of income, including earnings from rental properties, investments, sales, and other miscellaneous income. When reporting payments made to independent contractors, your business should use Form 1099-MISC.
Your business will need to fill out this form for every independent contractor that you pay more than $600 in the course of one tax year. To fill out the form, you will need access to:
- Your business name, address and Employer Identification Number
- Your contractor's business name, address, and Tax Identification Number (your contractor's TIN should be requested by having them fill out Form W-9)
- The total amount of compensation paid to the contractor
- Other information related to the type of compensation
Download Form 1099 from the IRS.gov website to see all required information.
Form 1099 is filled out by your business once at the end of each tax year, and then sent to both your contractor and the IRS. Additionally, your business should keep a copy of this form for your own records. The deadlines for Form 1099-MISC are:
- Copies B and 2 must be given to your independent contractor(s) on or before January 31st
- Copy A must be provided to the IRS on or before February 28th. For businesses filing electronically, this deadline is extended to March 31st
- Copy 1 must be given to most state tax authority on or before February 28th, unless your state does not have income tax.
If your business fails to file Form 1099 for any of your contractors, then you can be fined up to $250 for each failed filing.
Note: Alabama, D.C., Indiana, Kentucky, Nebraska, North Carolina, Utah, Virginia, and Wisconsin require earlier filing, typically by Jan. 31st or Feb. 1st, while some states allow for filing until March 31st.
The W-9 form, officially titled "Request for Taxpayer Identification Number and Certification," is used to verify your independent contractor's tax-withholding status after the hiring process. By filling out the W-9, contractors confirm that they are exempt from tax withholding. In addition, they supply you with their TIN (Tax Identification Number). Your business will need this number when completing Form 1099-MISC.
Once your contractor has filled out the W-9, make sure all required sections are filled out. You should keep the form in your business records. You do not need to submit the W-9 to the IRS.