- July 5, 2016
If you are the owner of a business in the United States and if you happen to hire the services of independent service providers or contractors, it is necessary for you to issue a certain special type of tax form to these contractors or service providers. This tax form is called the IRS Form 1099. It is important to note in this context that there are different variations of form 1099. To name some forms, there is form 1099-INT for interest income received by individuals from banks. Here, we will have a look at the IRS Form 1099-MISC. This is a form used by small businesses for reporting miscellaneous income paid to other individuals during a particular tax year.
Income Type Reported on Form 1099-MISC
Form 1099-MISC is basically used for reporting the payments made to the independent contractors or service providers and not to employees. Payments provided to employees are reported on Form W-2. Independent service providers or contractors are basically small service organizations or self-employed individuals hired by business organizations. The most prominent examples that fall in this category of service providers include web developers, graphic designers, freelance writers, cleaning services, grass cutting and landscaping services, forum moderators and other self-employed service providers. Here, it is important to be very clear on the point that independent workers are self-employed and they are not employees. The 1099-MISC is also used for reporting the payments made to partnerships, attorneys, and unincorporated business service providers.
What is the $600 Threshold?
Business organizations that make a payment of $600 or more to independent contractors are required to complete form 1099-MISC. these organizations need to add up all the payments that they make to a payee during a particular tax year. If this amount exceeds $600 during the year, the organizations need to issue form 1099 for that particular payee. However, if the compensation amount is less than $600 for the tax year, the organization is not required to go through the procedure of issuing form 1099-MISC. here it is important to note that there are some special threshold rules that need to be followed when reporting other varieties of 1099 form payments like fishing boat proceeds, sales of consumer goods for resale and the payments made to the attorneys. It is necessary for individuals to go through the instructions provided on form 1099-MISC in order to get the details on the procedure of reporting such payments.
The Correct Time to Issue Form 1099-MISC
When issuing form 1099-MISC, there are two significant 1099 due dates that need to be kept in mind. which are mailing form to the independent worker and reporting of 1099 forms to IRS.
