Tips for Filing IRS Form 1099-MISC Without an EIN
If you run a small business, you may work with a number of contractors, freelancers and vendors throughout the year. If you pay a particular contractor $600 for more for their services during any given year, you must complete an IRS Form 1099-MISC.
In general, taxes are not taken out at the time that payment is made. Instead, they must be paid and reported later to the Internal Revenue Service when the contractors complete their own income tax forms. These 1099-MISC forms include the Employer Identification Number (EIN) of the contractor as well as the total amount paid throughout the year and other contact information.
How can a business owner get the EIN to complete a 1099 form?
In most cases, you will get a Form W-9 for your vendor when you first start working together. This IRS tax form asks the contractor or vendor for their EIN and other identifying information. If you are hiring a single freelancer, they may use their Social Security Number. In other cases, they may obtain an EIN from the IRS. Getting an EIN is completely free, and small business owners can apply online. In most cases, they can get their EIN right away.
If you do not have an EIN for your vendor, you can still process your own tax forms and even issue a 1099. Still, you have a responsibility to undertake due diligence to get the information you need first. If you continue to contract with a vendor that does not provide an EIN, you may be required to perform backup withholding for potential federal taxes as a result.
Completing the Form W-9
While it is best to have the Form W-9 completed when your business first starts working with a vendor or freelancer, you can get the documentation later on if necessary. Make sure that you request a completed W-9 form at least three times in writing before you go ahead and complete your own tax forms without your contractor’s EIN. In most cases, you will be able to quickly get the EIN from your vendor or contractor. If you work with an online service that contracts freelancers, the service may take care of this step for you as part of the fees that you pay; check the details of your online service for details.
How to issue a 1099-MISC
If you made payments during the tax year to an independent contractor or vendor, you will need to issue the 1099 form to accompany them. You can account for all of the payments you made during the year on one form. In order to make sure that your 1099-MISC forms are timely, you must return them to your vendors or contractors before the end of January the following year. Even if you do not have all of the information you need, such as an EIN, you can still send the form to both the vendor and the IRS. Businesses and others are required by the IRS to complete these forms and issue them.
If you do not have all the information needed, you may face some challenges if you are using online tax preparation software. You may need to download and print or order from the IRS a 1099-MISC that can be submitted with incomplete data.
While the downloadable form is suitable for printing and delivering to the vendor or contractor, the IRS asks that people issuing 1099s request official, scannable forms for submission to the IRS itself, if they cannot do so electronically.
You can use all the information that you have to complete the form. If you do have an EIN, SSN or other tax identification number, this process should be fast and easy. If you do not, write the word “refused” in the tax identification number box on the 1099-MISC.
You should keep copies of the 1099-MISC that you submitted as well as your written requests for a W-9 form, in case you receive questions. The IRS should receive the red copy of the form, the state copy should go to the state tax agency and the final copy should go to the vendor or contractor.
Making sure your business gets the information you need
You can help to avoid problems later on by making sure that you request a W-9 right away when you first start a business relationship with a contractor or vendor. Especially if you work with a lot of individual contributors, it may be difficult to find them later on when you need to issue 1099-MISC forms. By building the W-9 step into your business processes, for example as part of the contract, you can help to avoid difficulties when tax time rolls around.
If you did submit a 1099-MISC with an EIN that the IRS rejects, you will hear back from the tax agency. They will send you Form CP-2100 or CP-2100A, informing you that the document has a non-matching EIN and name. The IRS will ask you to update the information needed. If you cannot verify a contractor’s EIN, you must withhold 24% of their payments going forward for use as backup withholding taxes, paid directly to the IRS like W-2 withholdings.
If you receive a 1099-MISC form as a freelancer or contractor
If you are a freelancer or contractor of any kind, you can expect to receive a 1099 form. To avoid problems on your end, make sure that you complete W-9 forms when requested in a timely fashion. Whether you rent out your home on Airbnb, do freelance writing or drive for Uber or Lyft, you might receive one of these forms.
Remember that they are also submitted to the IRS at the same time, so you must report the income as part of your annual tax return. If you fail to do so, the IRS can be expected to contact you and ask whether you are underreporting your income. It could increase your likelihood of an audit overall.
Reporting the information on your 1099 form
In most cases, you should have your 1099 form in hand by January 31 of the following year. You will generally include the information on the form as part of Schedule C for your Form 1040. This form addresses your net business income. The information you compile there is then transferred to Line 31 on Schedule 1 and finally to the 1040. Schedule 1 brings together the different types of 1099 form that you might receive, including those for dividends, unemployment compensation or other types of income separate from freelance or contracting pay.
If you realize that you do not have the 1099 you need to complete your tax forms, you can contact the business that you worked for to ask for the form. In some cases, they may not have all the contact information they need, while in other cases they may have failed to require the form yourself. In addition, you could receive a 1099 that is incorrect. Contact the business and ask them to formally amend the form before you file your own taxes.
Whether you are a business owner or a freelancer, you can face questions and complications when doing your taxes at the end of the year. At Picnic Tax, we connect you with an online accountant skilled in your area to help you file your annual taxes correctly and easily. All you do is upload your documents, and your skilled accountant will make sure that your tax forms are correct and provide you with maximum savings. Contact us today to find out how Picnic Tax can help you sort through your 1099s.