what is a 1099?

Recently a local client of mine was told they needed a 1099 for work a contractor in the United States had done.  The phone rings …

OMG - what is a 1099?!?!

In short, Form 1099 is an Internal Revenue Service (”IRS”) information return to report various types of income other than wages, salaries and tips (this would be on a Form W-2) paid to individuals (not corporations) in the United States.

In this case the Form 1099-MISC will be used to report amounts paid to an independent contractor (e.g. non-employee compensation) who is living in the United States.  The IRS requires businesses to submit a Form 1099 for every contractor paid at least $600 for services during a given tax year.  Three copies of the Form need to be made: one for the payer, one for the payee and one for the IRS.  Technically the form needs to be received by the individual before February 1 for services provided the prior tax year and submitted to the IRS before March 1.  The individual includes the 1099 with their personal tax return.

Everything the IRS does is complicated and the Form 1099 is no different.  First, even though the Form 1099 MISC, along with the other Form 1099’s, is available on the website for your review you cannot use this Form for filing.  You need to order the original forms (so order early!).  The only help guide is that which is attached to the Form itself or found here.

Egad.  Why are taxes soooo freakin’ complicated?

Business Ready is a strong supporter of using tax accountants to help navigate the tax waters so it is always best to verify this with your tax accountant (and your Controller).  Good luck!