If you use independent contractors (service providers who are not your employees) in your business, you may be required to file Forms 1099-MISC and the related Form 1096.  This is a form that you don’t want to miss because the IRS penalties for late filing or failure to file are a serious bummer.

Here is a link to the Form 1099 instructions, but these are the general rules for most small business owners and sole proprietors:

• The Form 1099-MISC/Form 1096 filing deadline is January 31, 2018.  This is both to distribute forms to nonemployee compensation recipients AND to file with the IRS.
• Prepare a Form 1099-MISC for any nonemployee compensation recipient paid $600 or more during 2017.
• Nonemployee compensation paid to independent contractors is reported in Box 7 of Form 1099-MISC.
• Form 1099-MISCs generally are not required to be issued to service providers that are organized as corporations (both Subchapter C and S).*
• For Form 1099-MISC filing using paper forms, the original forms suitable for filing with the IRS must be purchased.**  They can be ordered online or purchased at an office supply store.  (Pro tip: spring for the 1099 envelopes too.  Makes life easier and looks a lot more professional than plain envelopes.)
• If you pay independent contractors, be sure to have them fill out a Form W-9 so you have their tax identification number and updated address information.  Keep this Form W-9 in your files so it is available should the IRS ever want to see it.
• If you are a sole proprietor, I strongly recommend that you obtain an employer identification number.  You can apply for one online here.  This keeps your social security number from being distributed with every Form 1099-MISC.

It’s not too early to start thinking about this.  January is right around the corner!

 

*Attorney fees over $600 must be reported on Form 1099-MISC even if the legal provider is organized as a C or S Corporation.  Use Box 7.

**Unfortunately, the sample Forms 1099-MISC/Form 1096 on the IRS.gov website are not suitable for filing, and can trigger a penalty if submitted to the IRS.