Did you pay a person during the tax year 2020? Does the person is a contractor or an entity? Then you need to report the payments through 1099 Forms to the IRS. You’re required to issue an appropriate 1099 Form to the individual for performing services.
Doesn’t know about 1099 Forms? Then we’ll let you know about IRS 1099 Forms, uses of Federal 1099 Forms, and different 1099 Forms in the 2020 tax year. If you’re a first-time filer of 1099 Form, then you’re on the correct way. We’ll guide you in filing the appropriate 1099 Form without any errors.
What is an IRS 1099 Form?
A “1099 Form” is an information filing form, used to report independent contractor income to the IRS for federal tax purposes. These are the series of documents the Internal Revenue Service refers to as “information returns”. There are numerous types of 1099 Forms report the various type of income paid throughout the year other than the salary. The person or business individual is responsible for filling out the appropriate 1099 Form and furnish to the recipient within the due date.
Generally, a 1099 Form is similar to a W-2 Form and is used to track the independent contractor’s income who are not setup as a corporation. According to the IRS, a 1099 Form is given to non-employees paid by your business individuals.
Federal 1099 Form uses
Following are the uses of the Federal 1099 Form:
Figures out income
IRS 1099 Forms is used to calculate how much income does an independent contractor received during the tax year. 1099 Form provides information to the IRS regarding the income paid to an independent contractor during the calendar year.
Kind of income
A 1099 Form is used to figure out the kind of income received annually. The income received may a non-employee compensation, dividends and distributions, interest, etc.
Reporting tax return Form
The recipient uses 1099 Form information in filing the income tax return form. Report the income received in different places on your tax return, depending on what kind of income it was.
Who receives a 1099 Form in 2020?
The main purpose of 1099 Form is to record income. All kinds of people can get a 1099 Form for different reasons.
IRS 1099 Form is issued to an independent contractor who performed work on a course of business or trade and receives income annually.
For example: If the payee receives an independent contractor income of $600 as machine rent, then the payee receives a 1099 MISC Form. 1099 MISC Form is issued to the recipients who receive miscellaneous income of $600 or more annually.
1099 Form is furnished to a non-employee for performing services that are related to business or trade.
For example: If the payee receives non-employee compensation of about $600 as a reward for performing services, then the payee receives a 1099 NEC Form. 1099 NEC form is issued to a non-employee who receives compensation of $600 or more for performing services.
An attorney is a law firm. Attorneys receive an IRS 1099 Form for performing a legal activity or providing legal information.
For example: If an attorney receives compensation of $600 for providing legal information, then the attorney receives a 1099 MISC Form. 1099 MISC Form reports gross proceeds of $600 or more paid to attorneys for providing legal information.
Different 1099 Forms 2020
There are several types of 1099 Forms. Here are the commonly used 1099 Form for the 2020 tax year:
IRS 1099 MISC Form reports payments made to independent contractors for rent, royalties, gross proceeds, etc., during the calendar year. The payments made during the year must exceed $600.
Federal 1099 NEC Form is used to report non-employee compensations of $600 or more paid on the course of business or trade in a tax year. Non-employee compensations include fees, prizes, rewards, fee-splitting, etc.
Printable 1099 DIV form is used to report dividends and distributions paid $10 or more on stocks or $600 or more as part of the liquidation.
Form 1099 K reports third party network transactions and payment card transactions. You need to file a 1099 K Form if the payments made are through credit card or debit card or online transactions.
Who needs to fill out 1099 Form?
If your business hired an independent contractor and paid them more than $600 in a year, then you’re responsible to issue 1099 Form. In other words, the payer’s fill out 1099 Form:
If the payments made to independent contractors for royalties of $10 or more during the tax year.
You need to fill out 1099 Form for the payments made to attorneys as gross proceeds of $600 or more.
Payer made payments to a non-employee for performing services of about $600 or more in a tax year.
The taxpayer made payment card transactions of $20,000 or more and 200 transactions in a tax year.
1099 Form exempted payments
Following are the exempted payments which are reportable on 1099 Forms:
Don’t file 1099 Forms for the payments which are below the $600 threshold.
You’re not required to file Form 1099 for a contractor who is registered as a corporation.
Don’t use 1099 Forms to report wages paid to employees.
Businesses don’t need to provide 1099 Forms to workers hired through market places.
The last thing you have to do is pour your time into filing 1099 Forms with us. Why not simplify your responsibilities? We provide you service to e-file 1099 Forms easily and conveniently. We’ll help you in creating Forms easily and print unlimited 1099 Forms.