It's that time of year again when people start name-dropping IRS form numbers, such as 1099-MISC. This form is part of what the IRS calls "Information Returns". There are two basic reasons why self-employed or freelance individuals should know about IRS form 1099-MISC.
- If you worked as an independent contractor or freelancer, or were otherwise self-employed (unless you operated as a corporation) during tax year 2009, you should be receiving 1099s from any clients who paid you more than $600 over the course of the 2009 tax year.
- If, as part of your work as an independent contractor or freelancer, or during the operation of your own business - regardless of whether you operate as a sole proprietor, LLC or corporation, you are required to provide completed 1099-MISC forms to any independent contractors, subcontractors, freelancers, etc. (not employees and not corporations) to whom you made more than $600 in payments over the course of the 2009 tax year. Attorneys' fees of $600 or more paid in the course of your trade or business are reportable in box 7 of Form 1099-MISC. Some of these payments may go in box 14, Gross Proceeds if they include amounts paid in a legal settlement. (Don't shoot me, I'm just the messenger). See the IRS instructions (links below) for details.
Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements. Organizations also subject to these reporting requirements include trusts of qualified pension or profit-sharing plans of employers, certain organizations exempt from tax under section 501(c) or (d), farmers' cooperatives that are exempt from tax under section 521, and widely held fixed investment trusts. Payments by federal, state, or local government agencies are also reportable.What You'll Need to Complete 1099-MISC
If you are required to submit Form 1099-MISC to someone you paid, you will need their social security or tax identification number (TIN). For this purpose, you should ask the receiving party to complete a W-9 form, Request for Taxpayer Identification Number and Certification, if you don't already have one in your possession. While you could ask for the information over the telephone, you should ask for the W-9 as it certifies the number that the party has provided you and gets you off the hook for misreporting the number to the IRS.
Likewise, if you provided services in excess of $600 and are expecting a 1099-MISC, you might volunteer a completed W-9 form to your client(s) if you haven't already provided one, as a way of reminding your client(s) that they need to prepare one and send it to you. Whether you are the employee or the employer, you don't need to submit the W-9 to the IRS unless and until you are asked to produce it.
This Year's Deadlines
In any case, this year's deadline for providing 1099-MISC forms for the 2009 tax year is Monday, February 1st, 2010. There are a few exceptions that extend the deadline to February 15th, but they only apply if payments are being reported in Form 1099-MISC box 8 (Substitute Payments in Lieu of Dividends or Interest) or box 14 (Gross Proceeds Paid to an Attorney). Since, for the most part, payments to independent contractors are reported in box 7 (Nonemployee Compensation) of the form, it's highly likely the February 1st deadline will apply to you.
Most tax software programs, at least those with an available business edition, will include the form and instructions and make the form fairly easy to complete. If you made payments that are subject to from 1099-MISC and use an accountant or bookkeeper, be sure to provide the information to them in a timely manner, as they get extremely busy this time of year.
The appropriate copies of any 1099-MISC forms you complete for tax year 2009 must then be submitted to the IRS no later than February 28, 2010. Unless you file the forms with the IRS electronically, you will need to include IRS Form 1096 (Annual Summary and Transmittal of U.S. Information Returns) to transmit the "Information Returns" to the IRS.
Related IRS LinksForm 1099 MISC Instructions
IRS Guide to Information Returns
Order IRS Forms Online
Instructions for Form 1096 (PDF)