A Guide to Prepare 1099-MISC Forms Before the Due Date
You only have a a few days left to prepare and distribute your 1099-MISC forms to your contractors from 2016. The forms are due to your contractors by January 31st, 2017. The 1099-MISC form reports the total amount of payments you or your company paid to a single person or entity during the previous calendar year. Contractors use these forms to file their individual or business tax returns.
Who Must be Sent a 1099-MISC Form?
Small businesses must send out 1099-MISC reports to almost everyone they do business with. The form is given to non-employees, like independent contractors and other business entities paid by your business. The 1099-MISC form must be provided to any individual or business to whom you paid $600 or more in the tax year. In addition to all non-employees you have paid, make sure these are provided a 1099-MISC form as well:
Fees, commissions, rents, or royalties paid
Payment for prizes, awards, or legal services
The form is also used to report direct sales of at least $5000 of consumer products to a buyer anywhere other than the permanent retail establishment. Additionally, backup withholding is also reported on the 1099-MISC.
Preparing your 1099-MISC Forms
To prepare the 1099-MISC form, you will need to calculate the total amount paid for each vendor for the past calendar year.
For each 1099-MISC you prepare, you will need to include the following information about your business:
Your Business Name
Your Business Address
Your Federal Employer ID Number
You will need all of the recipient’s ID numbers, meaning either the SSN or the Federal EIN for all forms. You will find this on form W9 that you (should have) collected from your contractor prior to hiring them.
The following are all of the boxes on the 1099-MISC form to be filled out where appropriate with the correct payment amounts:
Fishing boat proceeds
Federal Income Tax Withheld
Medical and health care payments
Substitute payments in lieu of dividends or interest
Direct sales of $5000 or more of consumer products for resale
Crop insurance proceeds
Excess golden parachute payments
Gross proceeds paid to an attorney
Boxes 15a and 15b require you to record Section 409A deferrals and income. Section 409A refers to a section of the Internal Revenue Code which has to do with non-qualified deferred compensation plans. Check with your CPA if you think you may have to report non-qualified deferred compensation to one of your contractors.
Boxes 16, 17 and 18 require you to enter state and local information. The form allows you to enter information for up to two states. An additional form must be filled out if more than two states are needed. Here you must enter the State Withholding Tax (box 16), the State/Payer’s State Number (17), and the total State Income (18). Unless you withheld state or local income tax from the payments made to the contractors, boxes 16-18 will be blank.
Distributing your 1099-MISC forms
The 1099-MISC is a multi-part form and clearly labeled. Be sure to send the correct forms to the correct location.
Copy A is sent to the Internal Revenue Service
Copy 1 is sent to the state tax department(s)
Copy B is sent the recipient or contractor
Copy 2 is also sent to the recipient and is for them to file with his/her state income tax return
Copy C is for your records.
When you have completed all of your 1099-MISC forms, you must prepare and submit a Form 1096 to the IRS. Form 1096 totals all the information from the 1099 forms.
The information in this guide is designed to walk you through the process of filling out a 1099-MISC form. If, however, more questions or concerns arise, contact your CPA or tax professional. Additionally, you can contact Founder’s CPA for a free consultation.
Written by Curt Mastio, CPA of Founder’s CPA
Need Help? Schedule a FREE consultation with a CPA!