Did you as a small business pay another person or unincorporated business more than $600 total in the last year? You may have to provide them a 1099-MISC form.
Here are the specific rules as laid out in the official IRS Form 1099-MISC Instructions [pdf]:
The Internal Revenue Service (IRS) requires businesses (including not-for-profit organizations) to issue a Form 1099 to any individual or unincorporated business paid in excess of $600 per calendar year for services rendered. This is required whether these payments are spread out over the course of the year or are paid in one lump sum payment. The most effective way to obtain the information needed to prepare the Form 1099 is by requiring that an IRS Form W-9 be completed prior to any payment being made. The penalty for failure to file Form 1099 can be as much as 50% of the amount paid for services.
Note that last sentence: The penalty for failure to file Form 1099 can be as much as 50% of the amount paid for services.
The 1099-MISC forms must typically be sent out to independent contractors by January 31st following the end of the tax year in which you made the payments. You must also file a Form 1096 and submit the information to the IRS by March 31st.
If you’ve got your own accountant or payroll service, then you can pay them to generate the proper forms and send out these 1099s. However, I have done it myself as well, as it is not very difficult. Here are your options for generating and issuing a Form 1099:
- You can order physical, blank 1099 forms from the IRS for free, but it may take 10 business days or longer (2+ weeks) to arrive. (It look closer to a month for me!) Here is the IRS.gov order page. You’ll need at a minimum, Form 1099-MISC and Form 1096. You then fill out and print both forms yourself and mail it out. Cost: Free.
- You can order physical, blank 1099 forms online or from an office supply store. Here is the top-reviewed blank 1099-MISC kit from Amazon.com which includes multiple copies, envelopes, and 1096 forms. You then print it out yourself and mail it. Cost: ~$22 shipped for a kit of 25. You can get it with the printing software for about $35 shipped. This alternative brand includes online e-File instructions for about $16.
- You can use a 3rd-party online service where you fill out the information online and they’ll create a PDF for you. The most popular is Intuit’s version (they make TurboTax). You will still need to print it out and mail the 1099 forms to your independent contractors, but they will e-file the information to the IRS. Cost: ~$15 for up to 3 forms, $4 each additional.
- You can use 3rd-party tax prep software for businesses where you will be guided as with tax software as to how to fill out the appropriate forms. The most popular is TurboTax Business (not the personal edition), which will help you file your return and also generate both 1099-MISC and W-2 payroll forms for you. It comes with a 60-day money back guarantee from Intuit, so if it doesn’t work to your satisfaction, you can return it within 60 days for a full refund. Cost: ~$105 for tax filing software which includes unlimited 1099 and W-2 forms.
The easiest way would be to use a computer printer, but of course the IRS doesn’t make it that easy. In order to get the numbers “set” correctly for printing, you could be one of many free homemade templates out there (although I can’t vouch for any specific one as they may contain viruses or malware, etc). You can also buy forms + software packaged together to fill them out. Don’t forget to fill out the red copies for the IRS.
You can also fill out the official physical forms with a typewriter, or you can even handprint if you follow the IRS directions very carefully. Note that you cannot use the blank 1099 PDFs that you find online; they are only examples.
Finally, remember that your first job is to get a W-9 form [pdf] filled out by the person you paid, so that you’ll have their Tax ID to enter onto your tax forms.
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I’ve used http://www.wagefiling.com/ for several years. At $3.49/form, it’s quick and easy to get this tedious reporting complete in a few minutes
Thanks! This was just the type of service I needed.
What if someone who does not have a business license is trying to file a 1099 against me? Do they have to have a license if they are saying they are paying me? Also, what if the number they put is not the actual number?
This person cannot prove any checks written to me, nor can I prove that the number he says is NOT the real number (except for common sense when we sit down to look at all of the facts surrounding).
Depending on the type of business you are doing, you do NOT have to have a business license. Then again, the person may have a license, and you don’t know about it. As far as the money goes, people get paid in all kinds of ways, it does not have to be a check. If you were paid more than $600, the other person is REQUIRED to send you a 1099.
I did a few jobs for someone else and he paid me and said I would have to 1099 it. So do I need receipts of the amounts paid and dates individually, or do I just add the total and put that on the 1099 form? Like, do I need to send copies of payment amounts and dates, copies of receipts?
If you are the one getting paid for the jobs, the *person paying* is the one that has to generate the 1099-MISC, not you. They only have to file 1099-MISC if they paid more than $600 total over the year. You are just responsible for reporting any income on your own taxes.
I’ve used http://www.efile4biz.com for years, very happy, $3.95 each, with efile and electronic or mall delivery. Very easy to use.
thank you!
Thanks for the advice. Really helped.
You say “print it out yourself and mail it” How are you printing these? I have received from the IRS but what program are you using to print?
I’ve added some information in the original post to help you regarding printing the forms out.
I have the same question as Kelley. I have one 1099 to prepare and I already have the form. It seems like there should be a template, probably in Excel, where you can fill in the cells and print on the IRS form. I cannot find one anywhere. It should be noted, that according to the 2019 IRS instructions, handwritten forms are permissible. You need to use black ink, block letters not touching the lines, proportional spacing, no dollar signs and no commas in your figures. I have done it before and will do it again this year.
There are several templates online where people want to charge money to use them, but I can’t vouch for any specific site and I am vary of Word and Excel viruses/macros. I tried to create a template using a public site like Google Drive, but wasn’t successful. If anyone has a FREE template they want to share, I would be happy to host it here.
Great article! I’ve learned a lot
it doesn’t say they file in CA (efile4biz)
Would paying rent to a lanliatd for our business property count for having to provide a 1099?
and remember, the IRS does not like it when you fold the Form 1099 or Form 1096.
I’m freaking out and I gotta get this done today!
If there is a department of workforce services in your area, they have the forms for free.