The last few years since I've been making income from blogging I've had to learn a few new things about filing taxes – everything from filing my side income on Schedule C to making estimated tax payments throughout the year on blog income.
Another thing that I'm doing this year is having to file 1099 forms for freelancers that write for this site. It's kind of a pain because I've never had to do it before this year, but this year I had a couple of writers that wrote consistently all year, and breached the threshold for when you have to file.
Today I thought I'd briefly go through the process of filing a 1099.
1099-MISC – What Is It?
The 1099-MISC is a tax form that is used to report a variety of miscellaneous income types. The income reported would be that earned as a non-employee or contract worker. It can also include fees, commissions, rents, or royalties paid during the last tax year. Payments for prizes, awards, legal services, and other non-employee activities may be reported on this form as well.
So if you're a small business owner and you want to report money paid to a contractor or freelancer, you would want to use form 1099-MISC. Any worker that isn't an employee and getting a W2 from you would get a 1099. You are required to start sending out a 1099-MISC when you have paid a contractor at least $600 for a given tax year, and you're required to send it to them by January 31st – and to the IRS by February 28th.
If you're a freelancer, you should be receiving a 1099-MISC from those you have done at least $600 worth of work for by January 31st, their filing deadline.
Filling Out The 1099
So now the fun begins. How do you fill out the 1099 if you're reporting income paid to a freelancer?
Here's the process that I am following to report income to my freelancers. For more detailed instructions on reporting other types of income on this form check out the IRS form 1099 instructions.
- Request a W9 (Request for Taxpayer Identification Number and Certification) from the freelance worker. You'll need their social security number, address and other information to file the 1099.
- Write down your business Employer Identification Number (EIN) on the form. If you don't have one, use your Social Security number as the payer's federal identification number.
- Get the freelancer's W9 and then write down their Social Security number as the recipient's identification number on the 1099.
- In box 7, titled “Non-employee compensation”, write down the amount you have paid the freelance or contract worker.
- If you've withheld taxes, federal or state, write that down in box 4 or 16. It's pretty unlikely that you've done this if it is a freelancer.
- Fill in your name or your business name, along with address and phone number.
- Enter the contractor's name and address.
- No later than January 31st send copy B and copy 2 of the 1099-MISC to the contractor.
- Copy 1 of the form goes to the tax revenue department of the worker's home state by February 28. If there is no state income tax this can be skipped.
- Copy A of the 1099 goes to the IRS. Also going to the IRS is form 1096. Both must be sent by February 28. If you're filing electronically you must file copy A and Form 1096 by March 31st.
- Copy C of the 1099 can be saved for your records.
Filing Paper 1099 Versus Filing Electronically
There are a couple of different ways you can file your 1099.
- File 1099 Paper form: You can file the 1099 using the paper form acquired from the IRS.
- 1099 E-file: You can e-file the 1099 from a variety of different software, including the one I use – TurboTax Home and Business. There are also stand alone software that will do only W2 or 1099 filing. Just do a google search and you'll find a bunch of them!
Personally I'll probably be e-filing just because it'll be easier.
If you're a business owner and have paid a freelancer $600 or more, don't forget to file your 1099-MISC forms, it's a requirement! If you don't you could be setting yourself up for a mountain of tax headaches, so make it easy on yourself up front and take the extra time to fill out the forms.