Preparing and Filing 1099s - Step-by-Step Guide

Sep 19, 2026

Upload by Gloria

Guide to preparing and filing IRS Form 1099s for payments to contract workers exceeding $600 during the fiscal year. Explains who qualifies as an independent contractor, how to obtain the current 1099-MISC form, complete identification information, report nonemployee compensation in Box 7, and document any federal or state tax withholding. Covers required mailing and copy submissions, including IRS Form 1096 and deadlines, plus recordkeeping and clarification on employee vs contractor classification.

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Preparing and Filing 1099s

Determine whether a 1099 is required

Obtain and complete Form 1099-MISC

Mail 1099s and file with the IRS

Recordkeeping and compliance notes

Preparing and Filing 1099s The Internal Revenue Service requires you to prepare a 1099 for any contract worker if you paid the person more than $600 during the fiscal year. That $600 figure includes all trade-‐ or business-‐related payments, including money you gave to a contract worker for materials and parts. While there is no rock solid definition of an independent contractor vs. an employee, the IRS defines a contract worker as an individual (an individual or sole proprietor, not a corporation) who’s payer has the right to control or direct only the result of the work and not what or how the work will be done. Yo u ca nnot give a 1099 fo r m to a wo r ke r w ho is a n actua l e m ployee of yo u r o rga nizatio n . 1. Obtain a 1099-‐MISC form from the IRS. You can print out the form's most current version at [IRS.gov](IRS.gov), the agency's official website. 2. Fill out your federal identification number. This is either your personal Social Security Number or your Employer Identification Number, depending on your business' structure. If you are a sole proprietor, with or without a DBA, you should complete the 1099 using your Social Security Number. If you do not want to use your Social Security Number in the future, you can apply for a fede ra l & state ide ntificatio n n u m be r . This number, once obtained, will appear on the 1099s you hand out but you will still be a sole proprietor and your 1040 should have your Social Security Number on it. Having an EIN is also a standard requirement for opening a business checking account, which we recommend doing. 3. Fill the contract worker's identification field out using her Social Security Number. 4. Enter the amount of money you paid to the contract worker throughout the year in box 7, which is titled "Nonemployee compensation" on the 1099 form. 5. Write down how much federal or state income tax you withheld from the contract worker's pay in either box 4 or 11. Given the fact that you worked with an independent contractor, it isn't likely that you withheld any taxes. 6. Fill in the contact information fields for both your company and your contract worker. A phone number is only required for your business. 7. Enter the state where your company is located in box 12. The IRS prefers that you use a 2-‐letter abbreviation foryour state instead of writing out the full name. 8. Mail or give the 1099 to your contract worker no later than Ja n ua ry 3 1 following the tax year. 9. Send Copy 1 of the 1099 to the worker's home tax revenue department no later than Ja n ua ry 3 1. You do not have to do this if income tax is not deducted from the worker's pay in the state in which he or she resides. 10. Mail both Form 1096 and Copy A of the 1099 that you prepared for your contract worker to the IRS by Ja n ua ry 31st . Form 1096 includes the filer’s information (same as on the 1099) and the total of all 1099’s filed. Be sure to place an X in the box under 1099-‐MISC. The IRS mailing address for MN residents is: Department of the Treasury Internal Revenue Service Center Kansas City, MO 64999 If you complete your taxes electronically, you do not need to complete form 1096. The deadline for electronic filing is also Ja n ua ry 31st . 11. Keep Copy C of the 1099 for your own records. It is recommended that you retain copies of all of your tax documents for at least 4 years. PLEASE TAKE NOTE: Contact the IRS if you are at all unsure about the difference between an actual employee and a contract worker. The IRStakes an employer's obligations to its employees very seriously. It is illegal to classify as a contractor a person who is actually an employee. For more information visit [IRS.gov](IRS.gov)

FAQs

When is a 1099 required for a contract worker?

A 1099 is required when you paid a contract worker more than $600 during the fiscal year for trade- or business-related payments.

How does the IRS define an independent contractor for 1099 purposes?

The IRS defines a contract worker as an individual or sole proprietor (not a corporation) whose payer controls or directs only the result of the work, not how the work is done.

What are the key deadlines and filings after completing Form 1099-MISC?

Mail or give the 1099 to the worker no later than January 31 following the tax year, and send Copy 1 to the worker’s home tax revenue department by the same date. Mail Form 1096 and Copy A to the IRS by January 31 (unless filing electronically, which also has a January 31 electronic deadline).

What should you do if you are unsure whether someone is an employee or a contractor?

Contact the IRS for guidance, because it is illegal to classify an actual employee as a contractor. The IRS treats employer obligations to employees seriously.

Sep 19, 2026

Upload by Gloria