What form do independent contractors fill out for taxes

Once you’ve determined who your independent contractors are and you feel confident your books are in order, it’s time to file 1099-NECs. We’ll walk you through this step by step so you can ensure proper taxation.

Step 1: Understand the 1099 form

Businesses must provide a 1099-NEC to each contractor who is paid $600 or more in a calendar year. Independent contractors must include all payments on a tax return, including payments that total less than $600. Note also that nonemployee compensation includes payments to individuals and partnerships.

A number of payments do not require a 1099-NEC, including:

• Payments to a corporation, including a limited liability company that is treated as a C corporation or an S corporation for tax purposes.
• Business travel allowances paid to employees.
• Payments for merchandise, freight, or storage.

Payments through third-party networks—including credit card payments—are reported on Form 1099-K. If, for example, a business pays an independent contractor through PayPal, the contractor may receive a Form 1099-K from PayPal for those direct sales. Issuing a 1099-K depends on the number of transactions and the total dollar amount paid.

Use accounting software to fill out a Form 1099-NEC for each contractor and consult with a certified public accountant (CPA) regarding the 1099 forms your business must provide.

QuickBooks offers 1099 e-filing services with QuickBooks Payroll1 and QuickBooks Contractor Payments. When you use QuickBooks Payroll or Contractor Payments, Your 1099s will be automatically generated and e-filed for you, saving your time and helping you prepare for tax season. You can file unlimited 1099s, including 1099-NEC and 1099-MISC2.

Step 2: Gather all necessary information

Make sure you have all necessary documents for each independent contractor you employ. Each independent contractor should have filled out a W-9 prior to providing any services. These provide you with the following information useful to filling out 1099s:

• Post the nonemployee compensation to Box 1 on Form 1099-NEC and list your company’s taxpayer identification number (TIN) as Payer’s TIN. You’ll also list your firm’s name and address in the top left section of the form.
• List the Recipient’s TIN, name, and address.
• Record any federal and state income tax withholdings, if applicable.

Finally, you’ll see a section to report state income earned and your company’s state tax identification number. The IRS does not require this information, but many businesses include it to make state income tax filings easier for the contractor.

Step 3: Submit the 1099 form

When you produce a 1099-NEC, you provide copies of the form to different recipients:

• Submit Copy A to the IRS with Form 1096, which reports all 1099 forms issued to contractors, and the total dollar amount of payments.
• Send Copy 1 to your state’s department of revenue.
• Provide Copy B to the recipient (the contractor).
• Keep Copy C for your records; this documents the wage expense that you post on your business tax return.

The due date for producing 1099-NEC forms is on or before the first of February. You must provide a Form 1099-NEC to each contractor and to the IRS by that date. Many businesses e-file, and e-filing makes it easier to meet the filing deadline.

This can feel like a daunting amount of information and forms to fill out, so it’s okay if you’re still a bit confused. Below are some common questions about the 1099 process that we’re here to answer.

Who receives a 1099? 

Any contractor who has received $600 or more in non-employment income during the tax year must receive a 1099 form. This could be anything from dividends to paid labor. It is up to you, as a business owner, to issue these forms to your workers in the alloted time period.

What if I don’t get all of my 1099 forms?

If you don’t receive your 1099 forms by early February, contact your payer. If you’re still not seeing them by February 15th, you can call the IRS for help.

What if there are errors on my 1099 forms?

If there is a mistake or error on your 1099 form, such as the wrong address, a misspelled name, etc., contact your payer immediately and request a corrected form. If the payer has already filed the 1099 with the IRS, ask that they resend a corrected version. 

Do I have to pay taxes on my 1099 form?

Usually, yes. However, there are some exceptions, so please consult a professional if you are unsure whether you need to pay taxes on your 1099 income.

When are 1099 forms due?

1099 forms are due to taxpayers by January 31st. 

Making tax season a breeze

Preparing and filing 1099 forms can be tedious and time-consuming. While it may seem straightforward, the process can quickly become a headache if you employ a number of contractors.

Use this article as a guide for the process, but if you get overwhelmed, look for help elsewhere. QuickBooks Payroll can help automate the process and save you some time and frustration. Hiring an accountant or tax preparer can also help you manage the process.