What Are the Rules for Giving Out a 1099 Tax Form?

Give independent contractors 1099s in time for them to file their taxes.

Give independent contractors 1099s in time for them to file their taxes.

When you hire independent contractors for your small business, you need to give them a 1099-Misc if you paid them $600 or more in the previous tax year. The form shows how much they earned from you. You’ll also need to provide a 1099-Misc to anyone you pay $10 or more in royalties. Use a W-9 form from workers to collect the information you need to fill out the 1099.

Business Only

You can’t use the tax form to report money you gave to people for their personal use, like a loan you made to a friend or money you gave to a family member. The 1099-Misc is only used for business purposes. Use the form whether you have a business for profit or run a nonprofit organization. In addition to giving independent contractors 1099-Misc forms, you need to give a 1099-Misc for services, rent of office space or machinery, prizes and awards and pension-sharing plans. Additonally, you must give attorneys a 1099 when you paid them $600 or more for services rendered to your business.


Just when you think you got it all under wraps, up come the exceptions and there are a few of them under the 1099 rules. On the 1099, you only include payments for services from independent contractors, but do not include reimbursements you made to them for merchandise. You must give landlords a 1099 if you pay rent directly to the building owner. Only rent for office space is reported on a 1099, not utilities, freight or storage costs. However, if you pay your office rent to a real estate agent, you don't have to provide a 1099 to the agent.


While the people you paid may like to have the 1099 as soon as possible, you don’t have to send it out until Jan. 31. You then have until Feb. 28 to send a copy to the IRS. The Internal Revenue Service uses the copy to make sure taxes are paid by the recipient of the income reporting statement and to check it against your own tax deductions you took as business expenses. There are penalties if you miss those deadlines. In 2011, for example, you had to pay $30 for every 1099 that went out within 30 days late of the January deadline, $60 if you didn’t get it out until sometime between Feb. 1 and Aug. 1 and shot up to $100 if it was sent after Aug. 1. You’ll pay an additional $100 for every statement you just flat out don’t send too.

Deceased Employees

You continue to use the standard W-2 from to report a deceased employee's wages and withholdings in the year that he died. For any compensation due to the employee in the year after his death, you use the 1099-Misc form to report those funds to the estate or the benficiary. That includes nonqualified deferred compensation death plans, back pay and unused vacation pay. You'll need to include the social security number of the beneficiary or the tax identification number from the estate on the form.


About the Author

Linda Ray is an award-winning journalist with more than 20 years reporting experience. She's covered business for newspapers and magazines, including the "Greenville News," "Success Magazine" and "American City Business Journals." Ray holds a journalism degree and teaches writing, career development and an FDIC course called "Money Smart."

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