The Internal Revenue Service uses the form 1099-MISC to trach miscellaneous income in a business. If you are a small business owner, the IRS uses this form to track all payments that you made to independent contractors. Anyone that you hire to do a service for you on contract is an independent contractor.
For instance, if you outsource a web designer or a copy writer then that is an independent contractor that you pay. You only need to file a form 1099-MISC every year if you hired an independent contractor that particular year. For employees, you should not file a form 1099- MISC for them, they have a wage file for themselves so make sure not to misclassify them to avoid a penalty that comes with that.
One of the easiest way to file a 1099-MISC is through the online channel. The site with usually guide you through the process of filing of taxes. The first step you do in filing of the 1099-Misc is to gather all relevant information. The information includes, the amount you paid the independent contractor, the contractor’s legal name and address and the tax identification number. You can have the contractor fill out a W-9 in order to get the needed information. Make a thorough check on your account books to confirm everything.
When filling a form 1099-MISC, there are two copies which are copies A and B. Copy A should be the one you submit to the Internal Revenue Service while copy B should be sent to the independent contractor. It is a requirement to fill out a 1096 form if you are physically dropping off your form 1099-MISC. Another requirement is that you put the state in which your business is located. Make sure that you hit the deadlines since if you are late then there is a penalty that comes with late filing of returns.
The online process of filing returns differs from the physical one when filling out a form 1099-MISC. If you want to complete the whole filing process, you need to have the FIRE system. That is the way you fill out the copy A of the form 1099-MISC then mail it to the IRS. For the copy B, you need to email the independent contractor.
Before you even email the form 1099-MISC, you need to ask for consent from the contractor. This is done in a systematic way where you have first to ask for consent through email to show the IRS. You should have all the requirements for sending the email and have to comply with the IRS rules. The contractor thus gives a response by giving you the consent and you are free to send the form 1099-MISC copy B.