1099 Processing FAQ's
In this article
- What is a 1099-MISC form
- When is a 1099-MISC form due
- How to start the process of completing a 1099-MISC form
- Why complete a 1099-MISC form
What is a 1099-MISC form?
The 1099-MISC form is an information return the IRS requires you provide to any individual or unincorporated business whom you have issued $600 or more in rents or compensation (other than salaries, wages, tips or other employee compensation, which are reported on Form W-2). IRS also requires 1099s for payments of $10 or more in gross royalties. There are additional requirements and scenarios when a 1099 of other variants may be required. For more details, see IRS General Instructions for Certain Information Returns
When is a 1099-MISC form due?
Recipient copies must be postmarked by January 31. In addition, copies must be filed with the IRS by January 31 for all forms indicating box 7 non-employee compensation.
All others are due by February 28 if filed by paper, or March 31 if filed electronically. Penalties for late filing range from $30 - $100/form; penalties for intentionally disregarding the requirement are $250/form.
How do I start the process of completing a 1099-MISC form?
Typically, a business could take these or similar steps:
Step 1: Assuring you have retained accurate W-9 Forms from all vendors/contractors can be the most time consuming. It is never too early to start a review of your vendor/contractor data to confirm you have the required data on file.
- Run a 1099 Summary report summarizing your vendor/contractor payments for the year.
- Scrutinize all vendor payments to make sure all were flagged as 1099 Eligible.
- Run a 1099 Vendor details report showing each vendor/contractor’s details as should have been captured on the Form W-9 the vendor provided.
Step 2: Complete a 1099 Form for all required vendors/contractors using data from 1099 Summary & Vendor detail reports.
- Assure you are properly categorizing the payment based on the IRS 1099 General Instructions
- Be careful to prepare forms using an approved version; you can purchase from an office supply store, order direct from the IRS website, or use an approved electronic method such as those utilized by ASAP.
- Mail 1099 recipient copies to vendors/contractors by January 31
- Submit 1099 Form copies to IRS by filing deadline
- Submit 1099 Form copies along with DR-1106 to State of Colorado
Why complete a 1099-MISC form?
The information is used by the IRS to verify the vendor you paid has reported at least the amount you stated in gross business income. The IRS requires corporations on Form 1120 indicate whether or not they made any payments that would require a Form 1099 be filed and whether or not the form was filed. Thus your tax preparer will be required to review your 1099s to ensure all were accounted for properly prior to submitting your corporate tax return. Same is true of partnerships filing Form 1065.
As with all IRS items, there is a lot of fine print. This article cannot capture all scenarios.