1099 MISC Small Business Filing Requirements for 2012

IRS 1040 Tax Form Being Filled Out
IRS 1040 Tax Form Being Filled Out (Photo credit: kenteegardin)

Tax time is here again, and while individuals have until April 15 to get organized and file, the deadline is much sooner for some of the paperwork required for small businesses. The most common requirement for businesses is the W-2, which is needed for all paid employees and must be in the mail by January 31. However, there is another often overlooked form required by small businesses with income payments to non-employees (otherwise known as contractors); the 1099 MISC. And the deadline for this form is fast approaching– January 31 to mail to contractors, and February 28 to send to the IRS.

Who Must File a 1099 MISC?

The 1099 MISC is required to be filed by small businesses that paid over $600 to a particular contractor or subcontractor during a calendar year. Examples could be a person or company hired to do some construction work on your premises, a computer technician hired to set up an intra-company network and provide ongoing maintenance, or a copywriter hired to write promotional content for your business. There are generally 2 criteria to meet this requirement:

  1. You paid income to a person or entity that was a non-employee in exchange for a service provided.
  2. The income you paid exceeded $600 from Jan 1 through Dec 31 2012.

During the course of a year, it is easy to forget about contractors we hire for one-time jobs, and it often leads small businesspeople to wonder why they have such a filing requirement in the first place. The main reason the IRS requires the form 1099 MISC is to help them track the income of independent contractors. Otherwise, it would be much easier for these contractors to avoid paying the taxes they owe.

Specifics and Changes for Tax Year 2012

While the 1099 MISC is commonly used to report $600 or more of income paid to independent contractors, there are some other instances when this form is also required. They include:

  1. Payments of $10 or higher for tax-exempt interest, substitute dividends, or royalties.
  2. Payments made in any amount (even below $600) for members of a fishing boat crew and attorneys.
  3. Payments made in any amount to individuals that are subject to back-up withholding requirements.
  4. The sale of $5000 or more in consumer products in any place other than a permanent retail store (think flea markets or eBay).

There is one small change for tax year 2012, and it applies to income paid to agricultural workers holding an H-2A visa. If the worker provides you with a valid taxpayer identification number (TIN), then you should file a W2. Only in cases where their TIN is invalid are you required to file a 1099 MISC.

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