The 1099-MISC tax form is pretty common, but who exactly needs one? Well, it’s usually given to independent contractors, janitorial services, third-party accounts, and other workers who aren’t on the payroll. But, as with many IRS rules, it’s not that straightforward. Here are some guidelines to help you figure out if you need a 1099-MISC.
First off, was the payment more than $600? If it was less, you don’t need a 1099-MISC. Next, was the payment for services, not physical products? If so, you’re on the right track. Now, was the service for business purposes? If you paid for personal services, you don’t need to file a 1099. For instance, if you hired someone to remodel your office breakroom and paid them $5,000, you’d probably need to issue a 1099-MISC. But if you hired the same person to remodel your home kitchen, you wouldn’t need to file a 1099-MISC because that was a personal project, not a business one.
Now, let’s talk about working with S-Corps, C-Corps, and LLCs. There’s a common belief that businesses don’t need to send 1099-MISC forms to corporations. That’s true… sometimes. Generally, you don’t have to issue 1099-MISC forms to C Corporations and S Corporations. But there are exceptions, like medical and health care payments, payments to an attorney, and substitute payments in lieu of dividends or tax-exempt interest. If you contract with a business that is an LLC sole proprietorship, you will need to send out a 1099-MISC form. You can tell by looking at the Form W-9 your worker provided. If the W-9 shows they are an LLC taxed as a sole proprietorship, you need to send a 1099. If their LLC is taxed as an S- or a C-Corp, you don’t (unless an exception applies).
If you’re not sure whether to file a 1099-MISC, it’s better to err on the side of caution and file one. There’s no penalty for filing one when you didn’t need to, but not filing one when you should have can lead to hefty penalties. And here’s a tip: Always get the W-9 before you pay any vendor who might need a 1099-MISC. Some less reputable vendors might disappear when tax time rolls around and you need their information.
The quickest and most efficient way to file your 1099s (and meet the January 31 deadline!) is with eFile4Biz.com. This site lets you enter your data online, then eFile4Biz files your forms with the IRS electronically and also prints and mails copies to your independent contractors and other recipients.
