I see questions and confusion all the time regarding these forms. I thought I would take a moment to break them down.
First things first, you need to understand if and when you need to file a 1099, you can learn more about the criteria in another post I wrote here: 1099-MISC The Good, The Bad, The Penalties.
Ok now that you have the gist. Let’s jump into the detail;
The W-9 Form
The W-9 form is also known as “Request for Taxpayer Identification Numbers and Certification” You can obtain a blank fillable W-9 form HERE. This form is basically collecting the data you will need to file the 1099-Misc form (discussed below) at tax time. It is good practice to have anyone you are paying for services who is not your employees such as; freelancers, subcontractors, Virtual Assistants etc… fill out a W-9 prior to ever paying them. Likewise, if you are self-employed and providing these services for someone else you will need to provide them with a completed and signed W-9.
This way you know you have your ducks in a row.
The next stop is tax time 1099’s are due towards the end of January every year. You will need to look up the date each year as it shifts a little bit.
The 1099-MISC Form
The 1099-MISC Miscellaneous Income which you can view in more detail HERE
This form is meant to report income paid to those who are not employees. This is the only way the IRS can track that income. You can only deduct it if you report it. You are required to report anyone you paid for Rent, Services as mentioned above, Legal Fees over 600.00 for the tax year. Again reference the blog post above where I break out the exact detail of what you need to report.
There are many ways to file 1099’s some Bookkeeping software such as QuickBooks Online has it built in and they charge you a small fee to file. There are websites you can pay to electronically file your 1099’s or You can just fill them out by hand the old-fashioned way.
You keep a copy for your records, The person you paid gets a copy for their tax filings. And a copy goes to the IRS along with a form many rarely hear about the 1096 otherwise known as Annual Summary and Transmittal of U.S. Information Returns. Likewise, if you are self-employed you may be receiving these form your clients and you will file them with your tax return.
The 1096 form is just a listing of the 1099’s you are filing. It is just a summary that accompanies the IRS copies of the 1099. Nothing crazy but many are not aware that this form even exists.
When you electronically file you simply fill in all the info and the 1096 and 1099 filing is taken care of for you.
The two most important pieces are making sure you have the W-9 and you have tracked all payments to the person for the year so that you can report accurately on the 1099-MISC.
If any of this makes you nervous you should consult with an accountant as we can pretty much do these in our sleep.
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