J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Payments to Independent Contractors

WHO MUST REPORT

If you use independent contractors, freelancers, or subcontractors in your business and pay them $600 or more within the year, you must report these payments to the IRS as well as the contractors. In most cases, payments to corporations are not subject to this reporting requirement. However, you are required to report payments in the course of your business to incorporated attorneys and law firms.

File Form 1099-MISC, Miscellaneous Income. Request a copy of the form from the IRS at (800) 829-FORM or purchase it from an office supply company (the form is a triplicate form that cannot be downloaded from the IRS web site). The IRS copy of Form 1099-MISC must be accompanied by Form 1096, Annual Summary and Transmittal of U.S. Information Returns.

WHEN TO REPORT

You must furnish a copy of the form to the independent contractor no later than January 31 of the year following the year in which the payments were made.

You must provide the IRS with its copy no later than February 28 of the year following the year of payment. But if you file the form electronically, you have an additional month (to March 31) to file with the IRS.

If you need additional time to file, request a filing extension on Form 8809, Request for Extension of Time to File Information Returns.

WHERE TO REPORT

The filing location you use depends on where your business is located—there are 4 IRS service centers in which this information return is filed.

PENALTIES FOR NONFILING ...