Essential tips regarding 1099 misc form for independent contractors

Manpower is an essential resource for any business. Without effective manpower, a company can’t operate effectively. There are 2 types of categories that individuals can be classified when we associate them with a company. First, there are employees of the company who work for a fixed annual package, have certain rules and regulations to follow, work hours fixed for them and etc. On the other hand, there are people who are working for the company but not as employees, but as people hired by the firms on contract basis. In short, individuals hired on contract basis are self employed and work for the company for a certain time period and are not bound by any rules and work on their own flexible timing. Example could be – advocators, artists, designers, writers or any other freelancers.

When a business hires the services of independent contractors, they also have to track the payments given to them in order to report the payments on 1099 misc form. 

Now, if there are hundreds of independent contractors hired, it can certainly turn out to be a nightmare, if you have to individually file each 1099 form and mail it to the recipient. Imagine how much cost you will incur and the amount of time wasted. Now, there is a way out for that which I will come back to later.

Now, let’s discuss some essential pointers that you should keep in mind before filing 1099 misc forms:

1099 misc form is required for self employed and independent contractors

If you hired services of an independent contractor and paid them for their services $600 and more during the year 2011, then it is mandatory that you provide them 1099 misc form by the due date which is January 31st 2012.

Form 1099 misc is to be provided to individuals who are self employed and not to individuals who are registered as a corporation. The only way to know if a service provider is a corporation is to have them complete IRS Form W-9, Request for Taxpayer Identification Number and Certification.

Form 1099 misc is not required if businesses pay electronically

If you paid your contractors not by cash but through electronic payment method, say credit card, pay pal, gift card, etc, in that case, there is no need for you to file a 1099 misc form. The bank or credit card company that made the payment on your behalf will send the contractor Form1099-K.

TIN truncation pilot program extended through 2012.

The IRS is extending the Taxpayer Identification Number (TIN) truncation pilot program through 2012 for 1099s that are filed in 2012 and 2013. Payees’ TINs may be truncated on their paper copies but forms filed with the IRS must contain their full TINs. Under the truncation procedure, the first five digits are replaced with either asterisks or Xs: ***-**-1234 or XXX-XX-1234.

Unsure about issuing 1099 misc form.
If you are not sure if you are required to send 1099 misc form to your contractors, no worries go ahead and send one. There is no harm in sending extra 1099 forms. But if you are required to send 1099 misc forms and do not do so, then no one can save you from incurring penalties.

Send 1099 forms by the due date

Besides sending 1099misc forms to your contractors, you also have to file a copy with the IRS. If you plan to mail the 1099 copies then make sure you do so by Feb 28th. If you want to efile 1099 misc, then the due date is April 2nd 2012.

Now, as we said earlier, it can turn out to be a nightmare if you have to file hundreds of 1099 misc forms. Hence, to safeguard your pocket and your time, the best option would be to electronically file 1099 forms. Preferably you can select a service provider who will do your 1099 form filing. However, before selecting or zeroing on a service provider, it is essential that you understand certain requisites.

• The efile service provider should be IRS authorized and approved
• Efile service provider should have customer support service via email, phone and live chat.
• Efile service provider should provide secure portal for efiling 1099 forms
• Efile service provider should be cost effective

Tax1099.com is the first efile service provider which fulfills all the above requirements. At tax1099.com you can complete your 1099 online filing in a quick, easy and secure manner. Tax1099.com supports expertise customer support service and offers tele-efile service for your 1099 form filing.

Simple and quick process to file form 1099 misc for contract worker

If you are a small business owner and have hired the services of independent contractors/freelancers and paid them $600 and above as remuneration for their services, then there is no doubt that you have to file informational return form 1099 Misc. For each contractor that you hire and pay $600 and above, you have to file form 1099 misc.

Do not prepare a 1099-MISC for a worker who is your employee. This form is for non-employee compensation. You need to be aware of the rules distinguishing an employee from a non-employee. You have obligations to an employee that you must meet and that the IRS takes very seriously. Business owners will have to issue form W2 to employees for their income tax return.

Now, there are 2 processes to file form 1099 misc. One process is the paper filing method and the other method is the electronic filing method. Let’s discuss in details the steps to file form 1099 misc for each method.

PAPER FILING PROCESS TO FILE FORM 1099 MISC

• Determine you paid $600 or more to a contract worker during the tax year. Include only payments made in the course of your trade or business; personal payments are not included. Include payments made directly to the worker for parts and materials.
  
• Obtain form 1099-MISC. You can get the form from the nearest IRS office or from the IRS website. The form is titled "Miscellaneous Income."
  
• Write your business Employer Identification Number (EIN) or your Social Security number as the payer's federal identification number.
  
• Write the worker's Social Security number as the recipient's identification number.
  
• Write the amount of money you paid to the independent contract worker in box 7, titled "Non-employee compensation."
  
• Write any federal or state income tax withholding you have done for the worker inbox 4 or 11. It is unlikely you have withheld income tax for the worker.
  
• Fill in your name, address and phone number or that of your business.
  
• Fill in the worker's name and address.
  
• Write your state in box 12. Two-letter state abbreviations are preferred.
  
• Give or mail copy B and copy 2 of the 1099-MISC to the worker no later than January 31 of the year following the one during which the payments were made to the worker.
  
• Send copy 1 to the tax revenue department of the worker's home state by February 28. This is not necessary if that state has no state income tax.
  
• Send copy A to the IRS along with form 1096 by February 28.
  
• Retain copy C in your records.

Form 1096 is a summary of the information returns you are sending the IRS. Use only one form 1096 for all of your 1099-MISCs. You will need to include your name, address and phone number; your EIN or Social Security number; the total number of 1099-MISCs you are filing; the total of any federal income taxes you withheld for contract workers; and the total amount you paid to contract workers. Check the box titled "1099-MISC."

ELECTRONIC FILING PROCESS TO FILE FORM 1099 MISC

1. Register with the service provider whom you have selected for your1099 misc filing
2. Select the form, fill your information
3. Submit to IRS (1099 misc filing due date for efile is April 2nd 2012)

Now, that we have mentioned the filing process for both the methods, which one do you think is easy? Obviously, the electronic filing method, which is easier, quick and secure compared to paper filing. However, before selecting a service provider there is certain things that you have to make sure of. First, make sure the service provider you are selecting is certified and authorized by the IRS to efile 1099 misc returns. Second, the service provider should not be expensive but reasonably affordable and last, they should have a customer support system so that anytime you need assistance they are there to help you out. One such service provider who fulfills all the above requisites is tax1099.com.

Tax1099.com is an IRS certified efile provider who offers quick and efficient efiling service for your 1099 forms for price as low as $0.55 per recipient. Attax1099.com customers can enjoy the benefits of various free services and efiling of 1099 forms in an effortless manner. Tax1099.com also supports 24/7 help center for customers to provide them assistance during their filing as and when required by them. Customers can get in touch with tax1099.com via e-mail, live chat or phone.