So you have a piece of paper in your hand. It says 1099-Misc and you don’t know what to do with it. Well, if you are the receiver of such a document, that means you have performed a service for some entity and you have been paid. It is important for you as the receiver to check and make sure the amount is correct. Why? Because that amount is being told to the IRS and they will expect to see it on your tax return. The IRS can and will adjust your return to match the information that they have.
This means it is vitally important for the business to create these information returns accurately.
And that is why you are here. As a business owner, you need to care about this reporting requirement.
The long story short is that every contractor that does work for your business needs to have a 1099-Misc issued to him or her if they performed services totally $600 and up throughout the course of a calendar year.
Sounds simple enough, right? Your business hires somebody to do a job, such as paint a fence for a construction job, or take some photographs for advertising or maybe even writing a blog post. These are all services and if the person performing them is not a bona fide employee they need to get a 1099 by the due date. Unless of course they were paid via credit card. Or PayPal (sometimes). Or they are a corporation.
Well, maybe it is not so easy.
As is often the case when it comes to filing requirements, there are rules and then there are exceptions to the rules. And sometimes exceptions to the exceptions. But for the big picture, here is how it works: enter in Box 7 the amount of non-employee compensation you paid, give your contractor a copy of their 1099-Misc by the Jan 31st deadline and file with the IRS by the same due date. This means just what it sounds like: January is a rush to get these forms in, so it is never too early to start… have you given your contractor a W-9 to fill out yet?