Am I Supposed to File a 1099-MISC Form?
1099-MISC forms are shrouded in confusion in the online world...or rather the whole US among business owners with contractors.
With so many different boxes, having to figure out who gets one, and calculating out how much you paid out, it can all seem like a super scary undertaking!
OK...maybe not that level of scary!
But I'm going to break it all down for you!
What is a 1099-Misc Form?
A 1099-MISC form is just a fancy/scary name for a form that let's the IRS track contractor's income.
So here's the deal, it would be really easy for contractors to simply not report their income they earn that was paid in cash or ACH (bank to bank transfer) and go about their years never paying taxes.
Of course the IRS is like
So they created the 1099-MISC to keep this 'non-payment' of taxes at bay.
This is why you have to file this form for your contractors instead of them filing it for themselves.
So now that we've gotten that out of the way...
Who gets a 1099-misc?
I'm going to make this as easy as I can with a little yes or no quiz.
Simply take each person you paid this year through these questions including, but not limited to:
- Virtual Assistant
- Web Developer
- Lawyers (this one is special though, they will get a 1099-MISC regardless of their business entity)
- Social Media Manager
is the person in the United States?
If not, there's no need to worry with a 1099-MISC. But you will need to have them fill out a Form W-8BEN to certify they are not in the US.
If so, keep going.
Did you pay this person $600 or more?
If not, no need to file a 1099-MISC.
If so, keep going.
Is the person/business working for you a corporation or an LLC filing as a corporation?
Well first, how to we figure this out? The best way is to send everyone you paid more than $600 annually a W-9 Form.
If you'd like to understand what the W-9 Form is and why it's important, you can learn more in this post.
If they are a C Corp or S Corp, no need to file a 1099-MISC.
If they are a sole proprietor or LLC, keep going.
Did you pay them by ach (bank to bank transfer), cash, check, or direct deposit?
If not, meaning you paid them by credit card or PayPal, you don't need to file a 1099-MISC.
If so, you need to file a 1099-MISC.
Contractors paid by credit card or PayPal will receive a 1099-K if certain criteria are met from those payment processors, which means it isn't your problem or concern!
Steps to file a 1099-Misc
Step 1: Send contractors a w-9 form
This is just to help you figure out if they are a sole proprietor or LLC to know if you even need to file a 1099-MISC.
You can find a W-9 Form here.
If you want to read more about the W-9 Form, you can do that here.
Step 2: Look over w-9s to figure out who you need to file for
Any sole proprietors or LLCs?
Step 3: figure out how much you paid them for the year in ach, cash, check, or direct deposit
You will need this amount for the 1099-Form.
Step 4: File the 1099-MISC using track1099 or hire a bookkeeper or accountant to help
You can easily file your 1099-MISC using a cheap and easy software called Track1099.