Form 1099 is one of our most asked-about forms every tax year. This article will give you an overview of the most common questions and variations of Form 1099 that inDinero clients require. Please review our Tax Pricing Guide to learn about any costs associated with filing these forms through inDinero.
This is not an exhaustive list of all Form 1099 variations. Reach out to your account manager for more detailed information about your unique filing situation.
Table of Contents
- 1099-MISC - Miscellaneous Income
- 1099-K - Payment Card and Third Party Network Transactions
- 1099-INT - Interest Income
- General 1099 FAQs
- What is a 1099?
- How do I handle a contractor who lives abroad?
- What is the difference between a contractor and an employee?
- How much does inDinero charge to prepare a Form 1099?
A 1099-MISC is like a Form W-2 for contractors. A more detailed description, from our good friends at the IRS, explains that this information return is required to:
- Report payments made in the course of a trade or business to a person who is not an employee or to an unincorporated business.
- Report payments of $10 or more in gross royalties or $600 or more in rents or compensation.
As a general rule, if your contractor is a corporation of any type then you do not need to provide them with a 1099-MISC. For example, inDinero is a corporation. Even though you pay us, you don't need to provide us an information return. But if your contractor is any other type of business (individual, sole proprietorship, partnership, LLC, etc.) and you've paid them $600.00 or more, then you need to prepare a 1099-MISC. Common exceptions to this rule are landlords and attorneys who must have a 1099-MISC issued regardless of their business entity type.
How inDinero can help
Typically this can be as simple as completing a CSV template you can get from your your service team, and uploading it to the Client Uploads section of your inDinero account.
Make you have the following information available regarding each of your contractors:
- Full legal name
- Social Security Number (SSN) / Employer Identification Number (EIN)
- Email address
- Payment amount
- If the contractor is a landlord or attorney
Your tax team will then prepare your forms and return them to you via the Shared Docs section of your inDinero account for your review. Upon approval, your team will e-file the forms on your behalf.
If you provided valid email addresses for your vendors then they will receive a copy of the filed Form 1099-MISC in their email. If the vendor does not have a valid email address the be sure to stay compliant and send them a copy.
To ensure that you file the right information return on time and with accurate information, please contact your service team directly if you know or suspect that you may need this form.
Suggested reading: https://www.irs.gov/uac/about-form-1099misc.
You receive a 1099-K by 1/31 if, in the prior calendar year, you:
- received payments from payment card transactions (debit, credit or stored-value cards), and/or received payments in settlement of third-party payment network transactions, AND
- those gross payments exceeded $20,000 and more than 200 such transactions
How inDinero can help
Upload your 1099-K to the Shared Docs section of your inDinero dashboard. Your team will need to review your 1099-K in order to reconcile it against your books. For example, if your 1099-K says that you have 25,000 gross payments but we only have 12,000 recorded in your books/dashboard, then we can help you reconcile that before we file your taxes.
Suggested reading: https://www.irs.gov/Businesses/Understanding-Your-1099-K.
What is a 1099-INT?
It is a matching document used only for interest income paid out during the year. If the interest is paid in the normal course of business, the threshold to report is $600 per calendar year to a business and $10 to an individual. The latter is more applicable to banks and other financial institutions. Similar to other 1099s, these need to be provided to payees by January 31st. They must also be filed with the IRS by January 31st.
- Unless your company is a financial institution, 1099-INTs are generally forms that are generated and sent to you, rather than a form you have to send out like a 1099-MISC.
- These forms are typically just for record-keeping to ensure you report the correct amount on your own tax return and are not meant to be attached to your filing.
What about with convertible debt?
In this case, the interest is accrued but not paid out. Because of this, there is no 1099-INT reporting requirement.
What if we issued them when they weren't required?
This doesn't require any action on the company's part as the recipient (when an individual) is required to report any required interest income on their personal returns. If the amount is large enough to be material (example: $23k) it might be worth contacting the recipients.
How inDinero can help
We do not advise on personal income returns specifically so recipients need to ask their personal tax preparer.
Suggested reading: https://www.irs.gov/publications/p17/ch07.html.
Form 1099 is a broad-ranging series of information returns used to report any income a taxpayer receives other than salary from an employer. These forms can have differing filing requirements including due date. Please reach out to your account manager if you're unsure about your 1099 needs.
- If your contractor is a US citizen
If the recipient is a US person (including a US resident alien), the IRS requires you to treat that person as if they were a contractor working within the US. They can claim any applicable foreign income tax credits on their personal tax return. inDinero can help you file this information return per our typical procedures for US contractors.
Suggested reading: https://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad.
- If your contractor is not a US citizen
If the recipient is a foreign person, the IRS suggests that you request the recipient complete the appropriate Form W8-BEN.
Suggested reading: https://www.irs.gov/uac/form-w-8ben-certificate-of-foreign-status-of-beneficial-owner-for-united-states-tax-withholding.
This sounds like it might be really easy to define, but this is actually a really common question. The IRS has some really great guidelines on what makes an employee an employee and a contractor a contractor. These guidelines are called the Common Law Rules:
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
For a more robust explanation, see our full article on the topic here.
- On time: $25 for up to five forms and $5 for each additional form
- After deadlines: $50 for up to five forms and $10 for each additional form
For full pricing information, see our article here.
Our comments may not contain a full description of all the facts or a complete exposition and analysis of all relevant authorities. Furthermore, the use of certain words such as “should, would, or will” is merely for grammatical convenience, is not intended to indicate a specific level of authority regarding a particular issue, and no explicit or implicit references should be taken there from. Our comments expressed herein are based upon the provisions of the Internal Revenue Code and Regulations in force on the date hereof, all proposed amendments to these Acts, Regulations and treaties publicly announced by the relevant authorities. Each and all of these authorities are subject to change at any time. Any such change could be given retroactive effect with respect to the transactions described herein and could cause the conclusions provided to become invalid, in whole or in part, with respect to any entity involved. There can be no assurance that these authorities will not disagree with, or challenge, the views set forth in this memorandum or that any such challenge will be unsuccessful.