Guide: How to 1099 Someone
You know what you don't need? More employees. And why should you hire more people? It's expensive. You have to foot the bill on everything from training to benefits.
You have enough to worry about. It's time to start outsourcing. But when tax season comes, what do you do? Keep reading our guide on how to 1099 someone you've been using to suit your outsourcing needs.
What is a 1099-MISC?
This is a form that means "miscellaneous income". You'll send it out to any independent contractors who did business with you in the last year. It is the equivalent of a W-2 form for outsourced work. You've got until January 31st to get these forms in order and sent out. Not meeting this deadline will cost anywhere from $30-100 a form.
Step 1 - Check Your Information
Make sure you have the current name, address, and social security numbers on file for your independent contractors. This information should have been collected via W-9 form. If you don't have this information on file, the IRS will allow you to withhold 28% of the person or company's pay.
When trying to figure out how to 1099 someone, you might be wondering if there are any exceptions. Yes, there are! Anyone who received less than $600 in payments from you is excluded. Personal payments and transactions are also excluded.
Step 2 - Grab Your Forms
You cannot download these. You have to either order them from the IRS or pick them up at an office supply store. Another alternative: Some accounting software has these forms included. This will save you a ton of money in the long run.
Step 3 - Fill Out the Forms
These forms are printed in triplicate. You will send Copy A to the IRS. Copy B goes to the independent contractors, and Copy C is yours to keep for your records. You'll start with your information. This could be your social security number if you're a sole proprietor or an employer identification number for the majority of other businesses.
You'll work your way down, filling out your information and then the information of the contractor who worked for you. Enter all of the money paid to the person or business and any withholdings as well. If using accounting software, a lot of this will be done for you.
Step 4 - Mailing Out
After you've completed and mailed all of the 1099-MISC forms, the next step is to mail a 1096 to the IRS. This is the form that summarizes the total of monies spent on all of your outsourcing/independent contractors. You have until the last day of February to get this done. You must send this form in along with copies of all of the 1099-MISCs.
Final Thoughts on How to 1099 Someone
This task is a headache, there is no doubt about it. However, it's a requirement and you need to get together with your accountant ahead of time to work out the details so they can help you make the process as painless as possible.
They aren't the only ones who can assist. Refer to our 1099-MISC generator to automate your accounting and pay stub needs.