Form 1099-MISC is a tax form businesses use to report payments to freelancers, independent contractors, and others. This is in contrast to Form W-2, which is for reporting payments to employees on your payroll.
Depending on the type of payment, the amount of the payment, and your payment method, you may need to file Form 1099-MISC with the IRS. If so, you’ll also need to send a copy to the person or company you made the payment to so they can use it to file their taxes.
When do I need to file Form 1099-MISC?
Did you hire a freelancer or contractor to do some work for your business? If so, you’ll likely need to file a 1099-MISC.
Depending on your business, that might not be the only time you’ll have to deal with it. For example, if your business pays $600 or more in rents (such as rent paid for your office space), prizes and awards, or medical and health care costs to health care providers, you’ll also likely need to file the form.
Here’s the general rule of thumb: you have to file a 1099-MISC if the amount your business pays to any specific person or company during the year was at least $600.
For example, let’s say you hired a freelance designer to create animations for your website. If you only paid her $500 during the year, you don’t need to file a 1099-MISC. But if you paid her $5,000 over the course of the year, a 1099-MISC would be required.
But it’s not always easy to know which payments require a Form 1099-MISC and which don’t. For example, you’ll need one if you pay rent to a landlord but not if you paid it to a real estate agent or property manager.
If your payment is to a corporation, you generally can skip the 1099-MISC. This includes limited liability companies (LLCs) that are treated as a C or S corporation; you can find this information on their W-9. And you don’t need to file the form if you’ve made eligible payments to a tax-exempt organization or a government agency.
Check out the IRS website to see every type of payment that requires a Form 1099-MISC.
Form 1099-MISC vs. Form 1099-K
It’s also possible that you don’t need to file a 1099-MISC at all, even if your payments are $600 or more.
If you pay your freelancer or contractor—or make any of the other payments discussed above—through a third-party network like PayPal, you can breathe easy. When you use a payment provider, you don’t need to worry about the 1099-MISC. The same goes if you use credit cards, debit cards, and other payment cards online.
In these situations, the third-party network or payment card issuer, not you, may need to file a Form 1099-K instead.
As an FYI, Form 1099-K is filed when your payments through a third-party network to one person or company meet both of these criteria:
- Exceed $20,000 in total reportable payments; and
- Exceeds 200 total reportable payment transactions. Note: it doesn’t count as a reportable transaction if you’re withdrawing funds at an ATM, taking a cash advance or loan off your account, or paying by check through a credit card.
Considering the high transaction minimum, many small business owners won’t ever have to deal with a 1099-K. But if you do meet the requirements, just remember that the payment network or payment card issuer will file the form, not you.”
What do I need to file Form 1099-MISC?
If you’ve made payments that require you to file Form 1099-MISC, you’ll need the following information to submit it:
- Your name, address, and phone number;
- Your taxpayer identification number, which can be a Social Security Number, Individual Taxpayer Identification Number, Adoption Taxpayer Identification Number, or Employer Identification Number;
- The payee’s taxpayer identification number, which you can get by requesting they fill out a Form W-9;
- The payee’s name and address;
- The payee’s account number, which is assigned by you. This is mandatory if you have multiple accounts for one payee and are filing more than one Form 1099-MISC; and
- Any applicable payments and taxes withheld.
If you’ve made payments to an independent contractor or freelancer, you’ll need to file the 1099-MISC with the IRS by January 31, 2019, whether you file on paper or online. For other payments, the deadline is February 28, 2019, if you file on paper, or April 1, 2019, if you file online.
Depending on the state you live in, you may also need to file your 1099-MISC with the state. Check with your state’s tax commission to find out its requirements.
Lastly, you’ll need to send a copy of the form to the person or company you paid by January 31, so they can file their taxes properly.
To help things go more smoothly come tax time, keep track of your payments, and use this 1099 checklist to make sure you’re on top of things from the get-go.Updated September 14, 2018
This article provides general information and shouldn’t be construed as tax advice. Since tax rules may change over time and can vary by location and industry, please consult a CPA or tax advisor for advice specific to your business.