Who Gets A Form 1099-MISC?
Every once in a while, small business owners face the question of who gets a form 1099-MISC. On this point, the law is clear. If you've done business with an independent contractor, you probably have to send them a 1099 form. Of course, you should also report this payment to the IRS.
That said, you don't need to send out this form to absolutely everyone you've worked with in the past. In this article, we'll give you a brief overview of who should receive a 1099 form.
Who Gets a 1099-MISC
Before sending out the form to someone, you should confirm your business' association with them. With an independent contractor, you only control the result of their work. As a general rule, your relationship with them will be based on a specific project.
With an employee, you control when, where, and how they perform their job. Most relationships with employees last for an indefinite period of time. Also, employees receive regular paychecks. An independent contractor gets paid upon the project's completion or at scheduled times. Treating employees as independent contractors could lead to severe penalties.
Once you've verified the contractor's status, take a look at your records. According to the law, you should only issue a 1099 form to independent contractors to whom you paid over $600 during a tax year.
As we've mentioned, there are some exceptions to who should get a 1099 form. For instance, S and C corporations (including LLC's) are not subject to 1099 reporting. However, this usually doesn't apply to payments for legal services.
Payments to rental agents and tax-exempt organizations don't need to be reported either. The same applies to payments for merchandise, storage, freight, and similar items. Finally, attorneys to whom you paid over $600 in fees or gross proceeds must also be given a 1099 form. In this case, it doesn't matter if said attorney is a corporation.
Filling Out the Form
Now you know who needs a 1099-MISC form, let's confirm what it should look like. For starters, most payments to independent contractors should be reported in box 7 on your 1099 form. By doing so, you're classifying a payment as non-employee compensation.
Before filling out anyone's 1099 form, you'll need their W-9 form. The W-9 contains the person's name, address, and tax ID number. This can be a taxpayer identification number (TIN) or Social Security number (SSN).
What happens if someone refuses to give you their tax ID number? In that case, you're still legally required to file the 1099 form. However, the payment will be subject to backup withholding. Keep in mind that you have to send out all 1099 forms to their recipients by January 31st. Copies of those forms must be submitted to the IRS, along with the Form 1096.
Hopefully, this guide has helped you understand who gets a 1099-MISC form. To avoid any payroll tax issues, make sure to keep track of all your independent contractors.
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