If you or your business made or received a payment during the calendar year as a small business entity or self-employed individual, you are required to file an information return to the IRS. A 1099 form is what you’ll use to communicate that income information to tax authorities and submit to your contractors so they can do the same. While you may be most familiar with Form 1099-MISC, there are actually other types of 1099s and each one has a different purpose.
Want to learn more about your business’s filing requirements?
We’ve put together 19 of the Best Tax Filing Resources for Startups & Small Businesses
In fact, there quite a few different kinds—a few too many to include in a single blog post. Here we’ll summarize the ones we’ve seen our clients encounter most frequently, but please reach out directly to your service team or a tax expert if you have any questions about your business’s unique circumstances.
What each 1099 form is for + best practices for business owners
The 5 different 1099s to use when paying contractors:
You may be required to file an information return if you made any of the following types of payments, or if you withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.
- Form 1099-MISC is required for each person to whom you have paid during the year. However, not every contractor will need a 1099. As a general rule, if your contractor is a corporation of any type, you do not need to provide them with this form. For example, indinero is a corporation—so even though the businesses we work with are paying us, they don’t need to provide us with a 1099. On the flip side, if you’re working with a contractor who is any other type of business (individual, sole proprietorship, partnership, LLC, etc.) and you’ve paid them $600.00 or more, then you do need to prepare a 1099. A common exception to this rule are landlords and attorneys who must have a 1099 issued regardless of their business entity type.
- Form 1099-INT is what you’ll use for interest paid on a business debt to someone, excluding interest on an obligation issued by an individual
- Form 1099-DIV is required for dividends or other distributions to a company shareholder
- Form 1099-R stands for Retirement distribution for a retirement or profit plan or from an IRA or insurance contract
- Form 1099-K is what is used when making payments to merchants or other entities in settlement of reportable payment transactions, that is, any payment card or third party network transaction
Psst! Each business entity type has different filing requirements…
Read more about Finding and Filing the Right Forms for Your Business Taxes.
The 4 different 1099s for receiving a payments and other reporting:
You may also be required to file an information return if you received any of the following types of payments:
- Form 1099-S for the sale or exchange of real estate
- Form 1099-B if you are a broker and you sold a covered security belonging to your customer
- Form 1099-A is used when you’ve released someone from paying a debt secured by property or someone abandoned property that was subject to the debt or otherwise forgave their debt to you (Form 1099-C)
- Form 1099-MISC (a clear favorite) is for when you’ve made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment
You are not required to file information returns if any of the following situations apply:
- You are engaged in a trade or business and
- the payment was made to another business that is incorporated, or
- the sum of all payments made to the person or unincorporated business is less than $600 in one tax year.
Avoid penalties!
Make sure you include the necessary identification information:
You may be subject to a penalty for an incorrect or missing taxpayer identification number (TIN) on an information return. TINs are used to associate and verify amounts you report to the IRS with corresponding amounts on tax returns. Therefore, it is important that you furnish the follow information for recipients on the forms sent to the IRS accurately:
- Names
- Social Security Numbers (SSNs)
- Individual Taxpayer Identification Numbers (ITINs)
- Employer Identification Numbers (EINs)
- Adoption Taxpayer Identification Numbers (ATINs)
If the recipient is a U.S. person (including a U.S. citizen or resident alien), the IRS suggests that you request the recipient complete Form W-9, Request for Taxpayer Identification Number and Certification, or Form W-9S, Request for Student’s or Borrower’s Taxpayer Identification Number and Certification, if appropriate. If the recipient is a foreign person, the IRS suggests that you request the recipient complete the appropriate Form W-8.
Be sure to collect this information before making (or receiving) any payments that are reportable transactions.
It will save you the frustration of trying to locate the recipient (or payer) who may have moved during the year or is otherwise reluctant to share their TIN when it comes time to file the information return.
Ready to file your 1099? Here’s how to get started
How to file information returns:
You cannot file Copy A of information returns downloaded from the IRS website. The official printed version of the IRS form is scannable, but the online version of it, printed from the website, is not. A penalty may be imposed for filing forms that cannot be scanned. In addition, taxpayers with 250 or more information returns are required to file electronically.
How indinero can help:
Form 1099 tends to be the most common information return filed by startups and small businesses. If you have an indinero account, we’ve made this return simple with an easy to use template (log in to your account or contact your account manager for more information). If you don’t have an account, you can find the correct forms on the IRS’s website and use your bank statements or any accounts payable/receivable solution to fill and file the form manually.
Quick Note: This article is provided for informational purposes only, and is not legal, financial, accounting, or tax advice. You should consult appropriate professionals for advice on your specific situation. indinero assumes no liability for actions taken in reliance upon the information contained herein.
