Efiling tax forms is increasing in popularity due to its simplicity and the demand from the government for people and businesses to switch to efiled forms. There are many benefits to efiling that we’ll outline in this post. We’ll also explain how to efile 1099s so you can begin accessing the benefits of efiling this tax season.
1099 Tax Forms
If you’re a business and hire contractors or individual vendors, you are required to file a 1099 for each individual vendor you’ve paid over $600 over the course of the tax year. The kind of 1099 you are required to file —there are 16 different varieties—depends upon a number of factors.
The 1099 differs from the W2 in one critical way. When you hire contractors, you typically will not withhold taxes as you do with W2 employees. The 1099 serves the purpose of reporting how much you have paid your vendors to the IRS and leaves it up to the independent contractors to calculate their own taxes.
How to Efile 1099s
Efiling a form 1099 is much the same as filing a paper form 1099 in what you will require, but it’s a much quicker process. Ensure you have the relevant information handy before you begin the efiling process. If you efiled the previous year, check with your efile provider to see if the relevant information is still stored in the software to save yourself from re-entering data.
This is a helpful guide for which information to fill in on your 1099.
|How to Fill Out 1099 Forms, Box by Box|
|Box 1||Rents: Enter amounts of $600 dollars or more for all types of rents.|
Royalties: Enter gross royalty payments of 10 or more dollars.
|Box 3||Other income: The catch-all box. Enter other income of $600 or more that’s required to be reported on the 1099-MISC form and isn’t reportable in the other boxes.|
Federal income tax withheld: Enter backup withholdings. For example, persons who have not furnished their TINs to you are subject to withholdings on payments required to be reported in boxes 1,2,3,5,6,7,8,10, and 14.
|Box 5||Fishing boat proceeds: Enter the individual's share of all proceeds from the sale of a catch or the FMV of a distribution in kind to each crew member of fishing boats with normally fewer than 10 crew members.|
Medical and health care payments: Enter payments of $600 or more made in the course of your trade or business to each physician or other supplier or provider of medical or health care services. Include payments made by medical and health care insurers under health, accident, and sickness insurance programs.
Payer made direct sales of $5,000 or more:
Enter an "X" in the checkbox for sales by you of $5,000 or more of consumer products to a person on a buy-sell, deposit-commission, or other commission basis for resale (by the buyer or any other person) anywhere other than in a permanent retail establishment. Do not enter a dollar amount in this box.
Looking for Non-Employee Compensation? It has become its own form, the 1099-NEC. Learn more here.
Substitute payments in lieu of dividends or interest: Enter aggregate payments of at least $10 of substitute payments received by a broker for a customer in lieu of dividends or tax-exempt interest as a result of a loan of a customer's securities.
|Box 9||Enter crop insurance proceeds of $600 or more paid to farmers by insurance companies unless the farmer has informed the insurance company that expenses have been capitalized under section 278, 263A, or 447.|
Gross proceeds paid to an attorney: Enter gross proceeds of $600 or more paid to an attorney in connection with legal services (regardless of whether the services are performed for the payer).
|Box 13||Enter any excess golden parachute payments. An excess parachute payment is the amount of the excess of any parachute payment over the base amount (the average annual compensation for services includible in the individual's gross income over the most recent 5 tax years).|
Nonqualified deferred compensation: Enter all amounts deferred (including earnings on amounts deferred) that are includible in income under section 409A because the nonqualified deferred compensation (NQDC) plan fails to satisfy the requirements of section 409A. Do not include amounts properly reported on a Form 1099-MISC, corrected Form 1099-MISC, Form W-2, or Form W-2c for a prior year.
|Box 15-17||These boxes are typically not used. For more info on these boxes, consult IRS.gov or the back of your Copy B forms.|
GENERAL PRECAUTIONS: Be sure to report payments in current boxes as the IRS uses this info to verify recipient tax returns.
Where to Efile 1099s
When it comes to efiling 1099s, you have a few options. The IRS outlines four options for efiling tax information, though we’ve narrowed done some choices for you.
Our quick, easy efiling platformmakes it simple to efile both forms 1099 and W2. This service submits your tax information via IRS-approved channels and promises state-of-the-art security, full app integration with Excel and other accounting software, and digital recordkeeping.
Choosing a commercial tax preparation software like Quickbooksis an option for efiling your taxes. These services will submit your tax information through electronic IRS-approved channels.
The Benefits of Efiling
On July 1, 2019, the Taxpayer First Act was signed into law. The act works to simplify and streamline the tax process to make it easier for people, businesses, and the IRS. In the years to come, the IRS will mandate that more people and businesses efile returns. By 2022, businesses filing just 10 or more forms must electronically file.
The sooner you begin efiling, the sooner you will gain access to the many other benefits of filing electronically. Why wait when you can prepare yourself and your business for what’s to come right now?
When the IRS receives your physical tax returns, they need to type the data into their system manually. This method creates a significant amount of potential for human error that does not exist with efiling. Plus, if you made a mistake on your return, you’ll receive that feedback immediately instead of weeks later.
Efiling software also has built-in data verification and TIN verification that prevents most of the common mistakes made when paper filing.
Efiling saves time by streamlining the return process. It’s faster for you and the IRS. They don’t need to input your return, and you don’t need to spend extra time filling out and mailing forms.
Makes next year easier
Efiling sets you up for success in future years since most efiling software, including ours, retains your information. This means that in future years, the software will auto-populate the relevant boxes and save you from having to re-enter data.
Efiling offers added security to your tax filing process. Electronic filing is encrypted under strict IRS guidelines with technology that safeguards your information. Consider the difference an encrypted network makes compared to sending your tax return through the regular postal service where there’s the potential of loss or theft of your personal information.
Efiling reduces paper waste from forms and envelopes for those who are environmentally conscious. It may not seem like a lot, but it all adds up year after year.
Did you know Blue Summit Supplies offers quick and easy online filing for 1099, W2, and ACA forms? Create an account for free to get started! It’s a simple and safe way to electronically file, print, and mail your essential tax reporting forms.
More from Blue Summit Supplies
💡 Not efiling yet? Learn about the difference between 1099 and W2 envelopes and where you can purchase tax envelopes in our article: All About Tax Form Mailing: 1099 and W2 Envelopes.
💡 Implementing an organizational method for your receipts can help you prevent any accidental loss or missing proof of expenses. Find out more and learn How to Organize Receipts.
We’re big on efiling and helping businesses and individuals find the best tax filing options. Follow our blogfor the latest trends, strategies, product comparisons, and more.
This article is designed to provide accurate and authoritative information. However, it is not a substitute for legal advice and does not provide legal opinions on any specific facts or services. The information is provided with the understanding that any person or entity involved in creating, producing or distributing this article is not liable for any damages arising out of the use or inability to use this product. You are urged to consult an attorney concerning your particular situation and any specific questions or concerns you may have.
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