The 1099 form consists of a series of tax documents that serve to declare to the IRS (Internal Revenue Service) the income and payments made by a business or person that is not your employer.
This certificate contains the payments that were made during the year, and it is the payer who must fill out the form 1099 and then send a copy to the IRS, to you and, if necessary, to your state tax agency.
These payments, declared when filling out the form-1099, can be for income as an independent contractor or self-employed, rental income and/or tax refunds, among others. Keep reading this article to learn all the details about how to fill out the 1099 form, what are the different types of forms and much more.
Which are the types of form 1099 ?
In total, there are about 20 types of 1099 form, which are used to report information about different forms of income, so each one varies according to its requirements. These types of forms are used exclusively for reporting an overpayment.
It is worth mentioning that the IRS recently modified the conditions of the 1099-MISC form, which is the most used by companies that pay self-employed workers.
Among the most used 1099 forms, we can distinguish the following types:
- Form 1099-B: Used for mutual fund companies and brokerage firms.
- Form 1099-DIV: In case more than $10 in dividends, capital gains distributions and other distributions are received.
- Form 1099-G: You must file this document if you have been the beneficiary of unemployment compensation or other state contributions.
- Form 1099-INT: This is specifically for the financial services industry.
- Form 1099-K: Individuals who must file this form are those who accept more than 200 transactions from third parties, or whose total transactions received are at least $20,000. It is specifically intended for transactions made by credit card processors.
- Form 1099-R: This form must be filed by individuals who are beneficiaries of a retirement plan.
After naming some of the 1099 forms, the most commonly used forms are the 1099-MISC (Miscellaneous Income), and 1099-NEC (Non-Employee Compensation). This form is for, as we said before, independent contractors or small business owners.
What is the difference between Form 1099-MISC and 1099-NEC?
Earlier, we mentioned some of the many 1099 forms. However, the most commonly used are the 1099-NEC and the 1099-MISC. The difference between these two forms depends on who received the income and who paid it. Let’s take a brief look at each of them.
- Form 1099-MISC: This form must be completed when the person is paid more than $600 per year, whether for prizes, rent or other income that qualifies as compensation, although it does not necessarily have to be exclusive for this reason.
- Form 1099-NEC: To report payment of more than $600 a year to a person who is not your employee for work he or she performed for you.
Recently, the IRS reintroduced form 1099-NEC, so if instead of the 1099-MISC you received the 1099-NEC, you don’t need to worry.
How to fill out the 1099 form according to copy A or B?
In each document, you will be able to distinguish that there are two copies: Copy A and Copy B. Copy A appears in red, while Copy B appears in black.
Copy A is for information purposes only and should not be printed. You may scan the official IRS printed version, but the version that appears on the website should not be filed in print. You should only file the copy A downloaded from the web, to be sent by this means to the IRS.
In other words, as the payer, you have the duty to report your payment to the payee using copy A of each form to send to the IRS.
NOTE: If you file information return forms that cannot be scanned, the IRS may impose a penalty.
Copy B, and all forms shown in black, may be downloaded, printed, and presented to the recipient for the purpose of providing information to the recipient.
Copy B information forms are for providing payment data to the recipient. They are completed in the same manner as Copy A, and should be sent to the contractor for a record of the payment.
If you are a payee and receive Copy B from a client, you are not required to send it to the IRS, in fact, you should only report this income on your tax return.
What information do I need from the payee?
Before completing any form, whether it is the NEC or MISC, you should have the following payee information on hand to expedite and successfully complete the process.
- Payee’s name and address.
- Total payment sent.
- Taxpayer Identification Number (TIN).
To know the taxpayer identification number, you will have to ask the beneficiary to complete the W-9 form, which should have been filled out from the beginning, even before contracting him or her.
How, when, and where to send the 1099 form
Copies A and B of any 1099 form must be sent before an agreed date and through the required channels. Let’s see, below, how, when and where you must submit and send the copies.
- Send Copy A to the IRS
The first thing you must do is send Copy A to the IRS by January 31. You can file online or by mail. If you file electronically, you must enter the Filing Information Returns Electronically (FIRE).
IMPORTANT: Depending on the case, you may be required to complete Form 4419 before e-filing.
- Send Copy B to the payee
After you complete Form 1099 (either MISC or NEC), you must send a copy B to all of your beneficiaries by the IRS deadline of January 31. Before sending the copy electronically to the beneficiary, you must obtain the beneficiary’s consent.
- Send Form 1096
In case you have chosen the web submission method, you must attach, along with the hard copy of Form 1099 (MISC or NEC) and Copy A, Form 1096, which is also due by January 31.
Once you have all these documents together, you must send them to the IRS.
FACT: Form 1096 is used to track all physical 1099-forms filed during the tax year.