Form 1099-MISC

Tax Basics: Form 1099-MISC

As a small business owner, you’ll file Form 1099-MISC, Miscellaneous Income, to report funds paid to independent contractors, if you paid them $600 or more during the year.

Filling Out Form 1099-MISC

Payer’s Contact Information

Form 1099-MISC asks for your company’s name, street address, city, state, country, ZIP code and telephone number. You’re required to provide a phone number that directly reaches someone who can answer questions about the form.

Recipient’s Identification Number

The recipient’s identification number can be a social security number (SSN), individual taxpayer identification number (ITIN), or employer identification number (EIN). Make sure that you put the hyphens in the correct place, if you’re filing by paper. SSN and ITIN should be in the format of XXX-XX-XXXX, and EIN should be in the format of XX-XXXXXXX.

What if the Recipient Won’t Supply Their Identification Number?

When you first hire an independent contractor, ask them to fill out Form W-9 to provide you with their tax identification number and contact information.

If the contractor has already started work for you but refuses to provide you with their identification number , begin backup withholdings (a flat 28% rate) immediately and make at least three attempts to retrieve the contractor’s identification number (to avoid a penalty for failing to include an identification number on the 1099-MISC).

To send the backup withholding payment, complete and file Form 945 by February 1, 2018.

Account Number

The IRS requires an account number, if you’re filing multiple forms for one recipient, but they recommend that you include an account number for all forms you’re filing to ensure that any future or corrected forms are processed correctly.

The account number can be a checking or savings account number, serial number, policy number, or any other number you assign to the recipient. The account number must be unique and cannot be elsewhere on the form (i.e. the account number can’t be the recipient’s identification number).

Box 7

If you’re reporting funds paid to an independent contractor, you’ll enter the total amount paid during the year in Box 7, Nonemployee Compensation.

You can consider funds to be nonemployee compensation if you made a payment

  • to someone who isn’t your employee;
  • for services in the course of your business;
  • to an individual, partnership, or estate; and
  • of $600 or more during the year.

State Information

You may have to fill out state information if your state participates in the Combined Federal/State Filing Program or if your state requires you to file paper copies to your state tax department.

In Box 16, put any state income tax you withheld; in Box 17, put your state’s abbreviation and your state identification number; and in Box 18, enter the amount paid to the recipient in the state.

Form 1096

If you’re filing Forms 1099-MISC by paper, you’re required to file Form 1096 with the Forms 1099-MISC.

When you’re completing Form 1096, put the number of forms you’re filing in Box 3. For example, if you’re mailing 10 Forms 1099-MISC, you’ll write “10”. You’ll write the total amount reported on all the Forms 1099-MISC you’re filing in Box 5.

If you’re electronically filing your Forms 1099-MISC, don’t file Form 1096 because the IRS will receive the information automatically.

When to File

If you’re entering an amount in Box 7 on your 1099-MISC forms, the forms are due by January 31 of the following year.

If you’re not entering an amount in Box 7, you have until February 28 to file by paper and March 31 to file electronically.

You must provide the recipient with a copy of the 1099-MISC by February 15.

If any of these dates fall on a weekend of federal holiday, you have until the next business day to file.

Penalties for Filing Late

There are penalties for filing your Forms 1099-MISC late:

Time Returns Filed/Furnished Penalty for Small Businesses (Gross Receipts of $5 million or less)
Not more than 30 days late (or by March 30 if due date is February 28) $50 per return with a $186,000 maximum
31 days late through August 1 $100 per return with a $532,000 maximum
After August 1, or not filed at all $260 per return with a $1,064,000 maximum
Intentional Disregard $530 per return with no maximum