Businesses are required to send copies of Form 1099-MISC to the IRS and contractors if the business paid $10 or more in royalties or $600 or more in compensation to non-employees. Form 1099-MISC is due by January 31st to report payments made the previous calendar year. Accounting software can prepare and file Form 1099-MISC.
You can prepare Form 1099 using accounting software like QuickBooks. With QuickBooks, you can prepare Form 1099 using the financial data you’ve already been tracking and then print or email the forms directly to your contractors. Get started with up to 50% off QuickBooks.
What Is a 1099 Form?
Form 1099 is an information return. The most common for small and mid-size businesses is Form 1099-MISC, but there are other types. Form 1099-MISC is filed by businesses to report certain types of payments, most notably to independent contractors. Form 1099-MISC is due by January 31 to report payments made in the previous calendar year.
Who Is Required to File Form 1099-MISC?
Businesses are required to file Form 1099-MISC if they have paid at least the minimum threshold for various types of payments during the previous calendar year. Form 1099-MISC is typically issued to people, sole proprietors, and partnerships. In some circumstances, businesses may need to issue a Form 1099-MISC to corporations.
The minimum thresholds when businesses are required to form 1099-MISC are:
|Minimum Amount Paid by Your Business||Reason for the Payment|
|$600||Services performed by independent contractors (non-employees)|
|$600||Prizes and awards|
|$600||Medical and health care payments|
|$600||Crop insurance proceeds|
|$600||Cash payments for fish or other aquatic life|
|$600||Cash paid from a notional principal contract|
|$600||Attorneys and lawyers|
|$600||Fishing boat proceeds|
|$5,000||Direct sales of consumer products for resale anywhere other than retail stores|
|Any amount||Withholding of federal income tax under the backup withholding rules|
When Form 1099 Is Issued to Corporations
Form 1099 is issued to corporations, including limited liability companies taxed as a C corporation or S corporation in the following circumstances:
- Attorney fees and gross proceeds paid to attorneys
- Fish purchases
- Payments by federal agencies for services
- Payments by insurance companies for medical, dental and other health care services.
When to File Form 1099
The due date for filing Form 1099-MISC is January 31 for most businesses. By this January 31 deadline, businesses furnish one copy of Form 1099-MISC reporting payments made during the previous calendar year to their contractors and vendors. Another copy of Form 1099-MISC is filed with the IRS by the same deadline.
The deadlines for filing Form 1099-MISC are:
|Calendar Year||Due Date for Filing Form 1099-MISC|
|2017||January 31, 2018|
|2018||January 31, 2019|
|2019||January 31, 2020|
How to File Form 1099-MISC With the IRS
Businesses file one copy of Form 1099-MISC with the IRS. A second copy of Form 1099-MISC is furnished to the person or vendor who received the payments. Businesses can use paper forms or software to prepare the Form 1099-MISC. Alternatively, a business might want to hire an accountant to prepare and file the forms.
The different ways a business can prepare Form 1099-MISC include:
- Fill out paper forms: Order blank forms from the IRS for free; be sure to get Form 1096 in addition to Form 1099-MISC; fill out the forms using a computer or typewriter, then mail to the IRS and your contractors
- Download PDF forms: Use the downloadable Form 1099-MISC to prepare the copy you send to contractors and vendors; download the 2018 version of Form 1099-MISC from the IRS website, then type in information on-screen, and print and mail to your vendors
- Use accounting software: Some accounting software programs can prepare, print and e-file Form 1099-MISC; for example, see How to Complete 1099 Forms in QuickBooks
- Use payroll software: Some free payroll software programs can prepare Form 1099
- Use form 1099 software: There are a handful of desktop and Web-based software programs for preparing and e-filing Form 1099
- Hire an accountant: Tax professionals can prepare and e-file your 1099 forms in addition to your income tax return
How to Prepare Form 1099 in Four Steps
Preparing a Form 1099-MISC is a four-step process. First, make sure you have signed Form W-9 from your contractors. Second, compile the information needed from your accounting records. Third, prepare the 1099 forms. Finally, furnish copies of Form 1099-MISC to your contractors and vendors, and file another copy with the IRS.
1. Have All Independent Contractors Complete a Form W-9
Before paying a contractor for any work, it is important to have a completed Form W-9 signed by the independent contractor. Form W-9 shows information you will need for preparing Form 1099-MISC, such as the contractor’s name, address, and taxpayer identification number. Go through your records and find out if you need to request Form W-9.
The links for downloading Form W-9 are:
- Form W-9: This is the blank Form W-9; have your contractors fill this out, sign it, and send you a copy
- Instructions for the requester of Form W-9: These instructions are for businesses and cover issues, such as when to ask for a Form W-9 from a contractor
2. Track Payments Made to Independent Contractors
Businesses can keep track of payments made to contractors and vendors manually or using accounting software. At the end of the year, compile a report showing the total amount of payments to each contractor. Analyze this report to determine which contractors you need to send a Form 1099-MISC.
Did you know that by keeping track of payments to contractors using QuickBooks, you can then use QuickBooks to prepare your 1099 Forms for the year. Get started with QuickBooks Online and save half off for the first three months.
3. Complete Form 1099-MISC & Submit to IRS
Once you have a report showing total amounts paid to each contractor and the Form W-9, you are in a position to prepare the Form 1099-MISC. Fill out a Form 1099-MISC for each contractor or vendor as required. After reviewing each Form 1099-MISC for accuracy, file one copy with the IRS, either by mail or electronically.
Here is what Form 1099-MISC looks like, along with a brief description of what type of payments are reported in each box:
Box 1. Rents
Report payments of all types of rent if $600 or more during the calendar year. This includes rent for office space, warehouse space, machine, or equipment rentals.
Box 2. Royalties
Report payments of gross royalty payments if $10 or more during the calendar year. Royalties include payments to license intangible property like patents, copyrights, or trademarks. Royalties also include fees paid by a publisher to an author or literary agent.
Box 3. Other Income
Report payments of $600 or more for prizes, awards, and certain other types of payments that do not fit into any other box on Form 1099-MISC.
Other types of payments reported in Box 3 include:
- Prizes and awards, including the fair market value of noncash items
- Payments made to a deceased employee (see page 3 of the 2018 Instructions for Form 1099-MISC)
- Payments of Indian gaming profits to tribal members (see page 4 of the Instructions for Form 1099-MISC)
- Payments for participating in a medical research study
- Termination payments to former self-employed insurance salespeople
- Punitive damages, damages for nonphysical injuries and sicknesses (see page 6 of the Instructions for Form 1099-MISC)
Box 4. Federal Income Tax Withheld
Enter backup withholding in this box. If you withheld any federal tax from a contractor, you are required to file a Form 1099-MISC, even if the payment amount is less than the threshold.
A contractor might be subject to backup withholding if, for example, the contractor did not provide you with their federal taxpayer identification number or Social Security number. This is why it’s important to ask your contractors to give you a signed Form W-9 before paying them.
Box 5. Fishing Boat Proceeds
Enter the individual’s share of all proceeds from the sale of a fishing catch. Also report cash payments of up to $100 per trip that are contingent on a minimum catch and paid for other duties performed such as mate, engineer or cook. Do not report any wages that belong on Form W-2.
Box 6. Medical & Health Care Payments
Report payments of $600 or more made in the course of business to physicians, dentists and other providers of medical or health care services. Form 1099-MISC for box 6 amounts is sent not only to individuals and partnerships but also corporations and LLCs.
This box also includes payments from medical and health care insurers issued to health care providers. You are not required to include payments to pharmacies for prescription drugs.
Box 7. Non-employee Compensation
Report payments of $600 or more made to a non-employee. In general, businesses report payments to attorneys, accountants, and independent contractors in this box. This box should include fees, commissions, prizes and other compensation paid for services performed by a non-employee.
Normally, report non-employee compensation paid to individuals and partnerships. Payments to attorneys and lawyers, however, are reportable on Form 1099-MISC, even if the amount is paid to a law firm organized as a corporation.
Box 8. Substitute Payments in Lieu of Dividends or Interest
Report payments of $10 or more that are substitute payments in lieu of dividends or tax-exempt interest. Stockbrokers and financial institutions report substitute payments when dividends or tax-exempt interest is received on a security while those securities were on loan.
Box 9. Payer Made Direct Sales of $5,000 or More
Place a tick mark in box 9 if your business sold $5,000 or more of consumer products to an individual or partnership for resale in a nonretail environment. Typically, this is for Amway distributors and similar direct sales networks.
Box 10. Crop Insurance Proceeds
Insurance companies use Box 10 to report crop insurance proceeds of $600 or more paid to farmers. However, this amount does not need to be reported if farmers informed the insurance company that expenses have been capitalized for tax purposes.
Boxes 11-12. Blank Fields
No information is required in these two boxes, so leave them blank.
Box 13. Excess Golden Parachute Payments
Enter any excess golden parachute payments in this box. In general, an excess parachute payment is any amount that exceeds the average compensation for services in the individual’s gross income over the most recent five years. For more details, refer to page 8 of the 2018 Instructions for Form 1099-MISC.
Box 14. Gross Proceeds Paid to an Attorney
Report payments of $600 or more for gross proceeds paid to an attorney or law firm. Gross proceeds usually represent settlement amounts.
Payments for services rendered by an attorney are reported in Box 7 instead.
Box 15a. Section 409A Deferrals
In general, businesses do not have to complete Box 15a. Section 409A refers to certain types of nonqualified deferred compensation plans. For more details, please refer to page 9 of the 2018 Instructions for Form 1099-MISC, and IRS Notice 2008-115.
Box 15b. Section 409A Income
Report amounts deferred as part of a nonqualified deferred compensation plan that is includible in the taxable income of a non-employee. This same amount should also be included in the Box 7 amounts. Do not use this for deferred compensation for employees: that goes on Form W-2 instead. See the IRS’s Instructions for Form 1099-MISC for more details.
Boxes 16-18. State Information
These boxes need to be completed for those businesses who are required to file copies of Form 1099-MISC with state tax departments.
4. Provide Form 1099 to Independent Contractors & File With IRS
Provide one copy of Form 1099-MISC to each contractor or vendor and file all Forms 1099-MISC with the IRS. Send out these 1099 forms after you review them for accuracy and completeness. Businesses hand-deliver, mail, or electronically send Form 1099-MISC to their contractors. When filing with the IRS, either mail in paper forms or electronically file them.
Tips for filing Form 1099-MISC with the IRS include:
- Using the downloadable PDF: You can download a Form 1099 PDF for preparing copies for your contractors and records
- Use the official “red” version for mailing to IRS: The IRS strongly prefers that businesses use the official version of Form 1099-MISC, which is printed in red ink; this makes it easy for the IRS to scan into their systems; you can order the official version of Form 1099 for free on the IRS website
- Use software or accountant for e-file: If you prefer to file your Forms 1099, you will need to use software that can e-file the forms
- Include form 1096 when sending to IRS: Form 1096 functions as a cover sheet, telling the IRS how many 1099 forms you are filing, and other information; use the official “red” version if you are mailing in your forms to the IRS
With QuickBooks, you can e-file your Form 1099-MISC and email copies to your contractors. Get started with up to 50% off QuickBooks Online.
Form 1099-MISC Examples
We provide two examples of how to prepare a Form 1099-MISC. Our first example is a 1099 for an outside consultant. In our second example, we describe a situation where a Form 1099-MISC is not required because the amount paid is less than the reporting threshold.
1099 Reporting Scenario #1: 1099 Form Required
Mary is an independent human resources (HR) consultant. Your firm contracted Mary to set up your human resources information systems and provide training on the system. She is an independent contractor.
For 2018, your business paid Mary a total of $50,000 for non-employee compensation. Since $50,000 exceeds the $600 threshold for non-employee compensation, your business is required to file a Form 1099-MISC.
You show non-employee compensation of $50,000 in Box 7. This means that Mary will have to claim $50,000 of taxable earnings on her tax return.
Below is a sample Form 1099-MISC that you would issue to Mary:
1099 Reporting Scenario #2: Form 1099-MISC Not Required
Chris is an independent QuickBooks ProAdvisor. Your firm hired Chris to set up your QuickBooks files and train you on how to use the system. Chris also reviews your financial statements every quarter to make sure that you are doing things correctly. Chris is an independent contractor.
For 2018, your business paid Chris a total of $599 of non-employee compensation. Since $599 is less than the $600 threshold for non-employee compensation, your business is not required to file a Form 1099-MISC for Chris.
How to Create Form 1099-MISC in QuickBooks in 10 Steps
If you use an accounting software program like QuickBooks Online, then you can set the program up to keep track of all payments for which a Form 1099 might be required. This will help automate your Form 1099 reporting. Setting up Form 1099 tracking in QuickBooks Online can be done in 10 easy steps.
1. Set Up the Contractor as a Vendor in QuickBooks
When setting up a new vendor in QuickBooks, it is important to complete both the Tax ID number or Social Security number field, and the checkbox underneath that says Track payments for 1099 as indicated in the screenshot below. To learn how to set up a new vendor in QuickBooks, check out our setting up a new vendor tutorial. It has step-by-step written instructions and a short video to show you how to do it.
Tip: The W9 Form that we discussed previously will have all of the information that you need to complete this setup.
2. Set Up an Account to Track Vendor Expenses
To keep things simple, you should set up an account called Contractor Expenses on your Chart of Accounts List. To learn how to do this, check out our Chart of Accounts tutorial. Use this account to categorize all payments that you make to independent contractors.
3. Navigate to Vendor Center
From the left-hand menu bar, select Vendors as indicated below.
4. Navigate to 1099 Reporting
At the top of the Vendor screen, click the Prepare 1099s button as indicated below.
5. Prepare Forms 1099-MISC
From this screen, you can download the PDF document, watch the video, or just get started with preparing your 1099 Forms.
6. Review Your Company Details
From this screen, verify that your company information is correct. This information will print in the recipient portion of the Form 1099, so you want to make sure that it is accurate.
7. Assign Your Vendor Payments to 1099 Categories
From this screen, you want to put a checkmark next to each box that you will be reporting Form 1099 payments. Most small businesses will be using Box 7 (non-employee compensation). However, refer to the Who is Required to File Form 1099-MISC section of this article to see if any of the other boxes apply.
Once you select the appropriate boxes, then you select the account that was used to categorize these payments, such as subcontractors’ expense, as indicated below.
8. Confirm Your 1099 Vendors
Review the list of vendors to ensure that all independent contractors are listed here. If anyone is missing, click the Select 1099 vendors button as indicated below to add them to the list. Be sure to double check that the address and Tax ID number or Social Security number is correct. This is the information that will be printed in the Recipient section of the small business 1099 Form.
9. Review 1099 Vendors & Payments
This screen provides you with a preview of the totals that will print on each vendor’s 1099 Form. In the upper right-hand corner, you can see the total number of vendors and the total of all 1099 forms.
10. File & Send Your Forms 1099 to the IRS & Vendors
The final step is to file your 1099s electronically or print and mail your forms. See a brief description of what each option entails below.
What the Common Versions of Form 1099 Are
There are several varieties of Form 1099. Form 1099-MISC is the most common for small and mid-size business because this is the form used to report payments to independent contractors. Business should at least review if they need to file any of these other common versions of Form 1099.
The four most common varieties for Form 1099 for small and mid-size businesses are:
- Form 1099-CAP: Issued by corporations to report changes in corporate control and capital structure
- Form 1099-DIV: Issued by corporations and financial institutions to report dividends paid to shareholders; C-corps may need to issue this form to their shareholders
- Form 1099-INT: Issued by businesses and financial institutions to report interest payments; businesses may need to use this form to report interest paid to individuals or partnerships
- Form 1099-MISC: Issued by businesses to report non-employee compensation and various other types of payments
Form 1099 Frequently Asked Questions (FAQs)
We have discussed the general rules for Form 1099-MISC. Much more can be said about IRS Form 1099. If you have a question, feel free to post your question in the FitSmallBusiness forum. We will do our best to answer your questions.
Questions that small business owners often ask about Form 1099 include:
Can I Print Out & File Form 1099 From the IRS website?
You can use the download version of Form 1099-MISC to fill in and print out Copies 1, 2, B and C, which are for your business and your contractors. Copy A for the IRS, however, must be ordered from the IRS, and cannot be printed using the online PDF.
The 1099 form downloads for tax years 2018 and 2019 are available now:
What Is the Penalty for Not Sending a Form 1099?
The penalty depends on when you file the Form 1099 with the IRS. The penalty is $50 per form if you file Form 1099 filed within 30 days of the deadline. The penalty goes up to $100 if filed by August 1, or $270 if filed after August 1 or not filed at all.
The Bottom Line
Businesses may need to file Form 1099 to report various types of payments. Businesses are required to send copies of Form 1099-MISC to the IRS and contractors if the business paid $10 or more in royalties or $600 or more in compensation to non-employees. Form 1099-MISC is due by January 31 to report payments made the previous calendar year.
If you’re in the market for new accounting software, we recommend that you check out QuickBooks Online. In addition to making 1099 reporting a breeze, it keeps track of all income and expenses throughout the year. Check out our free QuickBooks Online course to help you get your business up and running smoothly.