FORM 1099: EVERYTHING YOU NEED TO KNOW

What Does a Startup Need to Know about IRS 1099 Forms?

1099s are an IRS form that you’ve got to get out to your contractors by January 31st for work that they performed the prior year. 

Who gets a 1099?

Contractors, LLCs, landlords, often law firms - people or entities your company pays who are not 1) employees or 2) C-corporations. Secondly, only people who were paid $600 or more, in aggregate, the previous year.  

You should be requesting W-9s from all of your non-employee vendors. Some vendors will let you know that they are C-corps and therefore do not get a 1099, so they won’t fill out a W-9.

Form 1099-NEC and Form 1099-MISC

If your startup’s independent contractors received Form 1099-MISC in the past, they will now receive Form 1099-NEC. Use Form 1099-NEC to report payments to contractors for work done in 2020 and onwards. Before 2020, your contractors would have received Form 1099-MISC for independent contractor payments. However, the IRS introduced the 1099-NEC specifically to streamline reporting non-employee compensation.

The 1099-MISC form is still used, but for reporting other miscellaneous income that isn’t considered non-employee compensation. This can include things like rent payments or prizes.

How do you fill out a 1099?

We recommend using Track1099, a user-friendly, online software that simplifies the process of creating 1099 forms for your business. Here is now to use it to create 1099’s:

Getting Started with Track1099

To start using Track1099, you need an invite from Kruze or your accounting firm. This will allow you to set up your login. After this, we can assign your company file on the W-9 side. When you log in, you’ll see your company name. Click it to access request forms such as W-9 (for US-based contractors), W-8BEN (for international sole proprietors), and W-8BEN-E (for international entities).

Of course, you can also just go to their website and set up an account if you are not a Kruze client!!

Requesting W-9

You can request a W-9 form by simply entering the name and email address of the contractor. Alternatively, you can bulk request by downloading a W-9 CSV template, filling in the names and emails, and importing it into the system. This is recommended if you have a bunch of contractors!

After sending the request, the status will indicate “Requested”. Once the contractor submits their W-9 form, it changes to “Signed”. However, be sure to warn your contractors that Track1099 emails, while secure, can sometimes be mistaken for phishing.

Creating a 1099

To create a 1099 form, add the contractor’s details ensuring to have a valid email address. If the details are incorrect, the status will indicate “Bounced”.

If a contractor sends you a PDF form, you can manually add the form to the system. Just copy over the information exactly as it is on the form. It’s crucial to ensure it matches their tax return to avoid any complications.

Once you add the contractor’s details manually, you can delete any previous requested form.

Adding a Company

To add a company, Track1099 requires an email address and Employer Identification Number (EIN). E-filing is the primary method, but Track1099 also offers e-delivery and mailing options. However, e-delivery is preferable as it allows tracking of sent and opened forms.

Track1099 acknowledges that C Corps usually don’t need a 1099 form. You can manually select these exceptions and they will be synced to the 1099 side when needed.

Adding International Forms

The process of adding international forms is the same as domestic ones. Use the W-8BEN and W-8BEN-E forms for international contractors and make sure to have all the information on the form.

If you encounter any issues or have any questions, feel free to reach out. We’re always here to assist.

And you can visit our “how to use track1099” page to get more detailed instructions on how to fill out, create and send 1099’s. 

Form 1099-MISC

Warning: This information is for informational purposes only and should not be used for official tax matters. Use the official Form 1099 and instructions, generally found at: https://www.irs.gov/forms-instructions. Rely on this information at your own risk. Visit https://www.irs.gov/forms-instructions for official IRS information. Consult with a tax professional.

Form 1099-MISC Miscellaneous Information

Warning: This information is for informational purposes only and should not be used for official tax matters. Use the official Form 1099 and instructions, generally found at: https://www.irs.gov/forms-instructions. Rely on this information at your own risk. Visit https://www.irs.gov/forms-instructions for official IRS information. Consult with a tax professional.

Form 1099-MISC Copy B

Warning: This information is for informational purposes only and should not be used for official tax matters. Use the official Form 1099 and instructions, generally found at: https://www.irs.gov/forms-instructions. Rely on this information at your own risk. Visit https://www.irs.gov/forms-instructions for official IRS information. Consult with a tax professional.

Instructions for Recipient

You received this form instead of Form W-2 because the payer did not consider you an employee and did not withhold income tax or social security and Medicare tax. If you believe you are an employee and cannot get the payer to correct this form, report the amount shown in box 1 on the line for “Wages, salaries, tips, etc.” of Form 1040, 1040-SR, or 1040-NR. You must also complete Form 8919 and attach it to your return. For more information, see Pub. 1779, Independent Contractor or Employee.

If you are not an employee but the amount in box 1 is not self- employment (SE) income (for example, it is income from a sporadic activity or a hobby), report the amount shown in box 1 on the “Other income” line (on Schedule 1 (Form 1040)). Recipient’s taxpayer identification number (TIN). For your protection, this form may show only the last four digits of your TIN (social security number (SSN), individual taxpayer identification number (ITIN), adoption taxpayer identification number (ATIN), or employer identification number (EIN)). However, the issuer has reported your complete TIN to the IRS. Account number. May show an account or other unique number the payer assigned to distinguish your account.

Box 1. Shows nonemployee compensation. If the amount in this box is SE income, report it on Schedule C or F (Form 1040) if a sole proprietor, or on Form 1065 and Schedule K-1 (Form 1065) if a partnership, and the recipient/partner completes Schedule SE (Form 1040).

Note: If you are receiving payments on which no income, social security, and Medicare taxes are withheld, you should make estimated tax payments. See Form 1040-ES (or Form 1040-ES (NR)). Individuals must report these amounts as explained in these box 1 instructions. Corporations, fiduciaries, and partnerships must report these amounts on the appropriate line of their tax returns.

Box 2. If checked, consumer products totaling $5,000 or more were sold to you for resale, on a buy-sell, a deposit-commission, or other basis. Generally, report any income from your sale of these products on Schedule C (Form 1040).

Box 3. Reserved for future use.

Box 4. Shows backup withholding. A payer must backup withhold on certain payments if you did not give your TIN to the payer. See Form W-9, Request for Taxpayer Identification Number and Certification, for information on backup withholding. Include this amount on your income tax return as tax withheld.

Boxes 5–7. State income tax withheld reporting boxes. Future developments. For the latest information about developments related to Form 1099-NEC and its instructions, such as legislation enacted after they were published, go to www.irs.gov/Form1099NEC. Free File Program. Go to www.irs.gov/FreeFile to see if you qualify for no-cost online federal tax preparation, e-filing, and direct deposit or payment options.

Warning: This information is for informational purposes only and should not be used for official tax matters. Use the official Form 1099 and instructions, generally found at: https://www.irs.gov/forms-instructions. Rely on this information at your own risk. Visit https://www.irs.gov/forms-instructions for official IRS information. Consult with a tax professional.

Form 1099 Copy C For Payer

Warning: This information is for informational purposes only and should not be used for official tax matters. Use the official Form 1099 and instructions, generally found at: https://www.irs.gov/forms-instructions. Rely on this information at your own risk. Visit https://www.irs.gov/forms-instructions for official IRS information. Consult with a tax professional.

Important Tax Dates for Startups

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