As a business owner, sending out 1099 forms to contractors can be a daunting task. However, it’s a necessary part of managing your business and staying in compliance with tax laws. In this article, we’ll walk you through the steps to successfully send out 1099 forms to contractors.
What Is a 1099 Form?
A 1099 form is a tax form used to report income that you paid to a non-employee, such as a contractor or freelancer. The form is sent to the IRS and the recipient of the income to report the amount earned and any taxes withheld.
Who Needs to Receive a 1099 Form?
According to the IRS, if you paid $600 or more to a non-employee for services performed for your business, you must issue a 1099 form. There are several types of 1099 forms, but the most common form is the 1099-MISC.
How to Send Out 1099 Forms to Contractors
Step 1: Gather Information
To prepare a 1099 form for a contractor, you`ll need their legal name, address, taxpayer identification number (TIN), and the total amount paid to them during the tax year.
Step 2: Verify Information
It’s crucial to ensure the information you have for the contractor is accurate and up-to-date. One way to verify their TIN is to have them complete a W-9 form before starting work for your business.
Step 3: Obtain Forms
You can order 1099 forms from the IRS or purchase them through an office supply store. You can also file 1099 forms electronically through the IRS website.
Step 4: Fill Out Forms
Fill in the contractor’s name, address, and TIN. Complete Box 7 for non-employee compensation and enter the total amount paid to the contractor during the tax year.
Step 5: Send Forms
Send a copy of the Form 1099-MISC to the contractor by January 31st of the following year, and file a copy with the IRS by February 28th. Submitting 1099 forms electronically gives you until March 31st of the following year.
Step 6: Retain Records
Keep a copy of the form for your records for at least four years.
Sending out 1099 forms to contractors is an essential part of managing your business. Gathering and verifying accurate information, obtaining the correct forms, and filling them out correctly is crucial to staying in compliance with tax laws. By following these simple steps, you can successfully send out 1099 forms to contractors and ensure your business stays on track.