The 1099-MISC is an information return the IRS requires you to file each year. The 1099-MISC deadlines for the 2012 tax year are approaching quickly, which means you need to start thinking about reporting vendor payments for your online business.
Purpose of 1099-MISC
The IRS issues the 1099-MISC form. It is considered an informational return in that it provides the IRS with information regarding the amount of money being paid to particular taxpayers. The businesses in question tend to be self-employed individuals the IRS finds it difficult to track. To overcome this problem, the IRS will collect the 1099s for a particular taxpayer and compare them to the total income reported by that taxpayer. If the numbers look askew, an audit is ordered.
Payments To Report
A 1099-MISC form is only filed for specific types of business transactions. The first thing to understand is we are talking about total payments to a party over a year. In most cases, the form must only be issued if you paid these individuals $600 or more in a year. For example, you would not need to issue a 1099-MISC for the freelancer who set up your blog if they were only paid $500 during the course of the year. In contrast, you would need to file the form if the fee were $750.
In an odd twist, you do not need to file 1099-MISC forms for payments to corporations. If you paid Google $20,000 during the year in the form of advertising costs on Google Adwords, there is no need to file. However, if the payments to the corporations are for health care or legal fees, they must be reported. After all, who trusts doctors and those damn lawyers!
When preparing 1099-MISC forms, you need to list the detailed and accurate information for the individual or business in question. The best method for doing this is to ask them to fill out a W-9 form issued by the IRS. They will then provide you with their correct legal name, tax identification number, address and so on.
The 1099-MISC deadlines need to be filed fairly quickly after the start of 2013. The actual filing dates are broken out into different periods. The reason for this is you are first required to send a copy of the 1099-MISC with the person in question. The taxpayer then has time to respond if they believe the numbers are inaccurate. Regardless, the 1099-MISC deadlines are as follows:
- January 31 – You must send the party you paid and are reporting on a copy of the form you intend to file with the IRS by this date. You can send it to them by mail.
- February 28 – If you are using snail mail for reporting, this is the date by which you must send the form into the IRS.
- March 31 – If you intend to electronically file all your 1099-MISC forms with the IRS, you have until this date to do so.
The 1099-MISC forms are electronically scanned by the IRS. This means you cannot simply print them off the web, fill them out and send them in. You either need to file electronically or you need to go to the library to get readable versions or order hard forms from the IRS. If you are going to file by snail mail, please make sure to also file IRS Form 1096, which is another information return that identifies how many 1099 forms you will be filing. Yes, there is an information filing for the information filing. Welcome to the world of tax.
Filing 1099-MISC forms with the IRS is not particularly difficult for online businesses. Half the battle is just making sure you have your records organized and you start working on it quickly after the start of 2013. In short, get moving and Happy New Years!
Richard A. Chapo, Esq.