File 1099 Forms Correctly
Many people have a hard time filling out their tax returns. This can be especially frustrating for business owners. Not only do they need to file personal and business taxes but they are also required to send W-2s and 1099s to the IRS and employees. Here are some tips on how to file 1099 forms correctly.
IRS 1099 forms are required for every service provider you use in a calendar year. The IRS considers a calendar year to be January 1 – December 31. Any independent contractor you pay $600 or more will need a 1099 form. You must know how to file 1099 forms with the IRS and send a copy to the contractor for their tax returns.
You must file 1099 forms for any qualifying vendor. Examples of the types of service providers you may include are healthcare expenses, work-for-hire contractors, attorney fees, equipment rentals and office space. Other agencies may also be required to file this form as well. Some of these agencies are famer’s coops, landlords, not for profits, and government agencies.
You should file 1099 forms with the IRS in March. This is typically when they are due. The deadline is slightly later if you choose to file electronically. If you need to file 250 or more forms, then you must file them electronically per the IRS. If you have less than 250 forms to file you may choose to do them manually. Be aware, that if you choose this option you must also include form 1096. This form summarizes all the other forms you are filing.
There are some
payouts you may make that are exempt. These types of payments may include merchandise bought for business purposes, employee wages, some travel expenses and freight and storage fees. Other companies may be exempt depending on if their MGC (merchant category code) states it is not required.
Keeping track of all this information can be a daunting task. If your business is large enough, you may want to hire an accountant. If you are lucky enough to get a good one, they will know how to file the 1099 forms for you. This will save you more time for your business and result in fewer headaches.
Small business owners may not be able to hire accountants. That’s OK, there are quite a few good software programs available to purchase. Some of these programs are very easy to use and others are more complicated. Prices for these programs vary as well. You can find a reasonably priced software program for around $39. Do a little research to make sure you get the best program for you.
If you take a little time to get prepared, it is not hard to know how to file 1099 forms correctly. Keep good documentation and collect all receipts throughout the year. This will make dealing with the IRS less stressful.
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