1099 Payroll: How to Process Your Contractor's 1099 Forms

If you’re employing an independent contractor to do work, you will need to provide the Form 1099, so they can accurately file tax returns to the IRS. There are lots of things you need to learn and consider when filing a form 1099. It’s also crucial that you provide the right information on the form to avoid unwanted penalties. It can be difficult if you’re still finding your footing in streamlining the payroll process of your independent contractors. However, our team of payroll professionals at PayCheck Stub Online teach you how to simplify the payroll process. Learn more about Form 1099 and how you can efficiently file a 1099 form.

Tax Form

What Is a Form 1099?

The IRS 1099 Form is a collection of tax forms that documents the different types of payments made by a person or organization to an independent contractor. The payer must fill out the form with the correct details and send copies to the independent contractor and the IRS, reporting payments made during the tax year.

Form 1099-MISC vs 1099-NEC: Which Should I Use?

When employing an independent contractor and filing their Form 1099, you must know what type you should send to them and the IRS. That way, you avoid errors and its costly consequences. Here’s insight on the different 1099 Forms for independent contractors:

  • 1099-MISC – This is filled up to report miscellaneous payments, like royalties, rent, payment to an attorney, and more. Form 1099-MISC is used by anyone who has paid at least $600 in one of these categories in the past year. 
  • 1099-NEC – This is to report non-employee income. Before, the 1099-MISC was used for this, but 2020 and beyond, filers must use 1099-NEC for it.

Click Here to Generate a Form 1099-MISC Instantly

What Every Small Business Should Keep in Mind When Sending Out 1099 Forms

  • Double-check your TIN. This can be found in your previous tax returns or forms filed with the IRS
  • Once you’ve onboarded your independent contractor, have them fill out a W-9
  • Make sure to keep all of your contractor’s information up to date
  • Use a payroll software to keep track of their wage history
  • Be up-to-date with form deadlines – Know that 1099s will be considered late if you submit them on February 1
  • Always stay updated on any IRS requirement changes

How to do Your 1099 Payroll in 5 Easy Steps

1. Let Your Contractor Fill Out a W-9

The W-9 Form is a form used to confirm a person’s name, address, and taxpayer identification number (TIN) for employment. 

2. Pay Your Contractors on Time 

Make sure that you provide your contractor accurate payments on time. Make sure to keep a record of your payments. You can use an online paystub application to create wage records instantly at a more cost-efficient rate.

3. Determine Whether You Need to Pay Backup Withholdings 

If your contractor failed to provide a TIN, you could incur a 24% withholding rate. Make sure to have them double-check the forms before submitting to the IRS.

4. Fill Out the Form 1099

Using the information on the W-9 they have submitted to you, fill out the Form 1099.

5. Send Out the 1099 to the Freelancer and IRS

Make sure to submit the Form 1099 to the IRS by January 31 to avoid costly penalties. 

Read More: Instructions for Forms 1099-MISC and 1099-NEC as of January 2022

Generate a Form 1099-MISC with PayCheck Stub Online

Do you want to generate a Form 1099 instantly? PayCheck Stub Online provides you a simpler way to fill out forms and have it sent digitally to your contractor and the IRS. Our team of payroll professionals and web developers have come up with a Form 1099-MISC generator that gives you the up-to-date forms provided by the IRS regularly. That way, you don’t have to worry about searching for the form and writing down the information. Instead, you can save time and money by doing your forms digitally. Not only that, if you want to send in your contractor’s payslip along with a copy of their Form 1099-MISC, you can do that as well using our paystub creator.

Streamline your 1099 payroll with our paystub app today! If you have any questions about our services, feel free to contact us.

People Also Ask About 1099 Payroll

You will have to pay the backup withholdings on their behalf. The withholding rate for the wrong or missing TIN is 24%. If you want to avoid this, you can use IRS services that will verify W-9 information.

This is given to any independent contractor who receives at least $600 in non-employment income during a calendar year. The IRS describes independent contractor as:

  • A person who is a sole proprietor of a trade or business
  • A member of a partnership that carries on a trade or business
  • A person in a business for themselves (including part-time business or gig worker)