Forms and Associated Taxes for Independent Contractors Changes for 2016

A new federal law, the Protecting Americans from Tax Hikes (PATH) Act, enacted in December 2015, moves up some 1099-MISC filing deadlines to January 31. The new law makes it easier for the IRS to find and stop refund fraud.

Businesses who use Form 1099-MISC to report non-employee compensation, such as payments to independent contractors, are now required to file Copy A with the IRS by January 31.

In the past, businesses typically had until the end of February, if filing on paper, or the end of March, if filing electronically, to submit their copies of this form.

Something that hasn’t changed: a copies of Form 1099-MISC must still be provided to the worker by January 31.

Form 1099-MISC

Form 1099-MISC (PDF) is most commonly used by payers to report payments made in the course of a trade or business to others for services.

If you paid someone who is not your employee, such as a subcontractor, attorney or accountant $600 or more for services provided during the year, a Form 1099-MISC (PDF) needs to be completed, and a copy of 1099-MISC (PDF) must be provided to the independent contractor by January 31 of the year following payment. Starting with 2016, you must also send a copy of this form to the IRS by January 31.

There are certain situations where a 1099 is not required. These exceptions are listed in the 1099 Instructions on IRS website.

Filing Electronically

The Filing Information Returns Electronically (FIRE) system is set up for financial institutions and others to file Information Return Forms 1042-S, 1098, 1099, 5498, 8027 or W-2G. Information Returns can be filed electronically, however, you must have software that can produce the file in the proper format as required by Publication 1220. FIRE does not provide an electronic fill-in form option.

If you paid for services provided by a limited liability company you may be required to issue a Form 1099-misc statement to the LLC. The instructions for issuing 1099-misc to LLCs requires determining what kind of an LLC you are dealing with for income tax reporting purposes. For federal tax purposes, a limited liability company (LLC) may elect to be taxed as a sole proprietorship, a disregarded entity; a partnership; or a corporation. Generally, if the payee is an LLC that is taxed as a:

• sole proprietorship: you must issue the 1099 with certain information including the name of the sole proprietor, the name of the LLC and the Social Security number of the sole proprietor

• partnership: you must issue the 1099 in the name of the business and list the employer identification number (EIN)

• corporation: you often will not need to file a 1099-misc