As a small business, you likely hired the help of independent contractors, lawyers, and other outside services throughout 2014. Despite the “non-employee” status of these individuals, you still must report this paid-out income to the IRS through the issuance of 1099s. Many types of 1099 forms exist, but the most commonly used is the 1099-MISC. We discuss the 1099-MISC requirements below, and walk you through the steps to prepare, issue, and file your corresponding paperwork.
What Do I Need? Before issuing your 1099s, you’ll need: 1) A list of everyone to whom you paid more than $600 throughout the year for services of any type 2) Form 1096, which is basically a one-page cover sheet for your 1099s 3) As many 1099 forms as you need to issue (You can obtain these forms by downloading them from accounting software programs, ordering them through the IRS, or picking them up at your local post office.)
What Are The Exceptions? There are many 1099 exceptions, but the two main exceptions relevant to small businesses are: 1) You do not need to send a 1099 to corporations. 2) You do not need to send a 1099 to real estate property managers to whom you paid rent. (If the property owner is the one accepting payment, (s)he should receive a 1099.) How Do I Issue Them? Preparing and issuing 1099s is a relatively straightforward process. In fact, the 1099 is one of the simplest IRS forms available. Once you’ve identified everyone to whom you need to send a 1099 and have obtained your forms, follow these five steps: 1) Fill out the 1099. The 1099 has only 17 boxes to fill in — most of which you probably won’t need to complete. The following are the likeliest boxes you’ll need to fill out: • Your business name and address • Your business Federal Identification Number (EIN) • Box 7, which is the amount paid to non-employees (NOTE: If the 1099 is being issued to a property owner to whom you’ve paid rent, put the amount paid in Box 1 instead of Box 7!)
2) Ensure you have three copies of each 1099. • One copy for the recipient • One copy for the IRS • One copy for your records
3) Mail your completed 1099s to all recipients. This includes all non-employees to whom you’ve paid $600+ during 2014.
4) Complete Form 1096. Again, Form 1096 is basically a cover sheet for the 1099s you submit to the IRS. You need to complete a 1096 for each type of 1099 you are submitting. For example, if you are submitting only 1099-MISCs, you only need to attach one 1096 to your 1099 forms.
5) Mail your forms to the IRS. Be sure to include all 1099s as well as a 1096 for each type of 1099 you submit!
What Are The Deadlines? • January 31– All 1099s must be mailed to contracted individuals by this date. • February 28- All 1099s and corresponding 1096s must be mailed to the IRS by this date. • State Reporting- You also must report 1099s to the State. Deadlines vary. Consult the Iowa Department of Revenue for details.
Following this short guide will help ensure you file your 1099s accurately, completely, and lawfully. Feel free to share your small business tax tips below, or contact our SBDC office at (712) 325-3376 for help with your business’ tax preparations.
The Iowa Western Small Business Development Center is a free resource for small businesses and start-ups in Southwest Iowa. We serve seven counties – including Cass, Fremont, Harrison, Mills, Page, Pottawattamie, and Shelby – and provide free counseling services to help businesses start, grow, and prosper.
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