- Determined who must receive a Form 1099-MISC;
- Collected your business taxpayer information;
- Sent for and retrieved your payee information through a completed W-9 form;
- And finalized and collected the payment amounts from your accounting system.
Sounds like you are good and ready to complete and file your 1099-MISC forms.
However, before you press that print or e-file button, take a moment to review your information and forms for accuracy in order to avoid potential penalties or other problems.
Some common mistakes when completing Form 1099-MISC are:
Sending a Form 1099-MISC to an Employee
Form 1099-MISC is used to report certain payments to non-employees. A non-employee is defined as someone who is not employed by your company, such as independent contractors, freelancers, or outsourcing companies.
Employees receive Form W-2 their wages and salaries received during the course of their employment.
Leaving Out Tax Identification Numbers
If you fail to provide a taxpayer identification number (TIN) on your submitted 1099-MISC form, the reported taxpayer could be subject to backup withholding. You can request the recipient’s TIN using a W-9 form.
You will also want to verify that the recipient’s TIN is correct. In addition to the signed W-9 form, you can utilize tools like TINCorrect to double-check that the information provided is corroborated with the IRS. TINCorrect can also be used to verify payer information.
Using the Form for the Wrong Year
As with all tax reporting forms, you should make sure you are completing the 1099-MISC forms for the correct tax year, which is the year the payments were made; NOT the year in which you are preparing the forms.
Not Using the Approved Form
There are several ways to acquire approved 1099-MISC paper forms for filing. You cannot simply download the Form 1099-MISC from the IRS form hub, copy, print, and send it. Copy A, which is sent to the IRS, uses a special red ink that cannot be duplicated by a copy machine.
You can order or purchase paper forms from an office supply store and the IRS directly, or you can use tax software such as BoomTax to transmit electronically to the IRS and send recipient copies via e-mail or paper mail.
Failing to Include a Transmittal Form
Form 1096 is the compilation report for paper Form 1099 Series reporting and other information returns. An individual 1096 compilation is required for each type of information return you are filing. For example, if you are filing 1099-MISC and 1099-R forms, you will need to generate one 1096 for the 1099-MISC forms and one 1096 for the 1099-R forms.
However, if you are e-filing your 1099 forms, you are not required to include a Form 1096.
Making General Form Errors
Completing the 1099-MISC forms on your own could result in simple errors such as using ink that is too light, forgetting decimal points, inserting font that is too large or too small, or mis-formatting data such as the payee name.
Using tax software such as BoomTax could help avoid or minimize such simple errors.