Top Tips to Prepare 1099-MISC Forms on Your Own

1099MISC

You can prepare your own 1099 MISC forms. All you need are the right forms.

 

The 1099-MISC form is what you need to give to a contract laborer if you pay them over $600 in the course of the year.  There’s a whole new emphasis on reporting and so many more businesses are finding that they need to be issuing 1099s.  But there’s a lot of confusion about how.

 

A few years ago I was at the IRS office near my house asking if they had any of the new 1099-MISC forms that I could have.  “What do you want them for?”  The IRS agent asked me.  So I explained to her that I was teaching a class about 1099s and wanted to have the actual forms to hand out to the class.

 

“Oh thank God!”  She said.  Now, I work with the IRS a lot.  I do audits and debt resolution, and although I genuinely like most of the agents I get to work with, I can assure you that “Oh, thank God,” is not a phrase used when the IRS is dealing with me.   (Unless it’s used as “Oh thank God she’s gone now, but that’s about it.)

 

So I asked her why she was so excited that I was teaching a 1099 class and she told me about all the mistakes that they see and the problems they have with bad 1099s. “Somebody’s got to teach this stuff,” she told me.    So I figured it would make for a good blog topic.

 

The Basics

 

Here’s a link to see the 1099-MISC form.   1099MISC       If you’re the business owner, you need to issue the 1099 to the recipient by January 31.  New for 2017 – you must submit the 1099 to the IRS by January 31 also.

 

My directions here are just an overview; here are the official IRS directions:   IRS 1099 Directions  If you have questions, that’s the best place to look.

 

The Quick and Dirty

 

Generally, when you prepare a 1099-MISC you’ll put the dollar amounts in box 7 for non-employee compensation.  If you’re preparing a 1099-MISC for any other reason, you should check the rules to make sure you’re using the right box.  I’m talking about non-employee compensation.  Write in the white part of the box, not the red.

 

Payers name, address, etc, is you.   Recipient is who you paid.  I recommend using EIN numbers instead of Social Security Numbers whenever that’s an option for safety.

 

You put the whole amount of money you paid the person into box 7.  For example, let’s say I hired Brad the Painter to do some work in my offices.  I paid him $600 for the labor, $75 for the paint, and $25 for his parking.  If I paid that money to Brad, even though part of it was for supplies not labor, I give him a 1099 for the whole $700.  Brad will write off the $75 for paint and $25 for parking as his business expenses.

 

Mail your 1099MISC with a transmittal form.  1096 Transmittal Form   

 

The filer is you (or your company.)  The forms being reported is the 1099-MISC.  The total amount reported on the 1096 is the total of what you paid the 1099 contract laborers.  Here’s a clue—that number you put in box 5 should also go somewhere on your business tax return as a 1099 contract labor expense.

 

The IRS’s Biggest Complaints

  1. People are supposed to use the red forms.  You have to use the real form; you can’t print it off the computer, even if you have a color printer.  Those forms are scanned so it has to be the right paper.  You can order your 1099-MISC and your 1096 transmittal from for free from the IRS.  Here’s the link:  IRS Forms Order
  2. Don’t cut the copies.  Leave all the pages whole.  If you only have 1 form to issue, just leave the second one blank.
  3. Don’t staple the returns.  Don’t fold, spindle or mutilate them in any way.  They have to go through a scanner so leave them plain.
  4. That means you have to mail them in the big envelope.  I keep getting asked about that.  Don’t fold means use a big envelope.

 

Smaller Complaints

  1. Do not use a $ sign when typing in the amounts.  It’s already on the form.
  2. Do use a decimal point and cents.  So I didn’t pay Brad $700 I paid Brad 700.00
  3. Do not put 0’s in spaces, just leave them blank.
  4. Do not use # signs.  For example, on the form 1096 where it asks for the number of forms, I would write 1, not #1.

 

A note about handwritten returns:  Handwritten returns are more likely to have errors than other returns.  Usually it’s a Taxpayer Identification Number and name mismatch.   If you are using a person’s name—use their social security number.  If you are using a business name, use the EIN number.  That’s a common mistake.    Be sure to use block print and not script.  Yes, I need to say, print neatly.

 

If you are typing it on a typewriter, you need to use black ink and 12 point courier font.

 

The 1099-MISC reporting rules have a lot of people confused, but you don’t have to do this alone.  We can prepare 1099-MISC for a fee and we e-file them with the IRS.

168 thoughts on “Top Tips to Prepare 1099-MISC Forms on Your Own

  1. Hi Lisa,
    If you are reimbursing travel expenses that you were given detailed reciepts for – this is considered to be an “accountable plan” just like for employees, then you do not have to include that in the 1099. But – the recipient may not deduct those expenses on their personal return.

  2. Hi Steve,
    If you have enough forms to make a new one, I’d make a new one. These forms go through a scanner and even though you write “void” it’s possible that it could scan the incorrect information anyway. You should be okay voiding it, but why risk it if you don’t have to?

  3. If I understand correctly, I don’t include reimbursed travel expenses when paying contractors…IF they give me a detailed list/receipts. Basically, I’m just refunding their cash expense and then they (obviously) don’t include those same expenses on their return.

  4. I have made a mistake on one of my 1099 forms. Can I just write a new one below it and cross out or VOID the incorrect one?
    Thanks, your post is very helpful.
    Steve

  5. Hi Sara,
    Technically, you should issue the 1099 for the full amount and your driver should deduct the percentage he pays you as an expense on his income tax return.

  6. Hey,

    I have a trucking company and I charge my driver a percentage to find him loads. Would I make the 1099 with or without the percentage? Lets say his invoices come out to $1,100 and I charge $50 would I make the 1099 for $1,100 or $1,500.00?)

  7. Hi Nicole,
    You would think so, right? Wouldn’t that be brilliant? That’s such an incredibly great idea that of course the IRS hasn’t thought of it. There are some sites where you can do that, but you pay for it. If you google file 1099s online you get a bunch of companies that will do it for you. I don’t recommend any one over the other, but it’s not that expensive.

  8. Hi Fabian,
    Report the 1099MISC as income – because that’s what the IRS is going to see. Then, expense the repairs and maintenance paid to others against that income. Technically, the issuer is correct in including the reimbursement on the 1099misc since you should be writing off that expense.

    Now, if the 1099MISC is for even more than what you were paid, plus the reimbursement – then you should make an offset against the income to show that you were over-billed. I just did that today on a return. I put it on the returns and allowances line.

    So let’s say you billed $1000 for your labor. And the company also reimbursed you for $500 in parts. But they put an extra $200 on the 1099 that you never received at all – so you’ve got a 1099MISC for $1700. You have to report the $1700 in income because the IRS sees that. But you expense the $500 as supplies (line 22.) (Or, depending upon the situation, maybe it’s a cost of goods sold, then it would go on line 36 of page 2, either way – you’re writing off that reimbursement.) You’d put the extra $200 on line 2 – for returns and allowances. So now you’re only showing the $1000 that you actually earned.

    Of course, if you have any other expenses against the income, you’ll want to write that off too.

  9. Why does the IRS require us to use a typewriter to fill out their copy if we don’t want to buy third-party software?

  10. If I wrote checks to a seamstress for $1409 and $1195 was for alteration services while $214 was from sales of her items in my shop, do I put the full 1409 or 1195 on her 1099? Thanks

  11. I have received a 1099 Misc; however the amount it was reported as paid is incorrect.
    a) the largest part was for reimbursement of repairs and maintenance paid to others,
    b) there is an amount in excess of the amount of payment received
    The issuer of this 1099MISC has refused to clarify nor correct it.
    What would you suggest I do with this incorrect 1099. What recourse do I have? will the IRS help resolving the dispute?, please help me.

  12. Hi,
    If i rent a space for one day of filming, do I sent the business a 1099?
    And, is this consider Rent or other income?
    Thank you!

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