When you own a business, you may need to hire an extra helping hand, like a vendor or contractor, to get a job done. And when you pay an independent contractor or vendor, you may be responsible (depending on how much you paid them during the year) for distributing and filing either Form 1099-NEC or Form 1099-MISC. Lucky for you, there’s an easy way to file these forms. Cue e-Filing 1099s.
Overview of Forms 1099
Before we dive into the IRS e-File 1099 process, let’s take a brief look at a couple of 1099 forms.
As a business owner, you should know about the two most common 1099 forms:
- Form 1099-MISC: Information return to report payments and miscellaneous income paid to vendors
- Form 1099-NEC: Reports nonemployee compensation paid to contractors
Prior to 2020, business owners used Form 1099-MISC to report all 1099 payments. Now, you must use Form 1099-NEC to report payments made to independent contractors. Do not use 1099 forms to report payments made to W-2 employees.
Regardless of if you need to file 1099-MISC, 1099-NEC, or both, you must send the forms to the IRS. And, you must distribute multiple copies of the form to various parties:
- Copy A: The IRS
- Copy 1: State tax department, if applicable
- Copy B: Recipient (independent contractor or vendor)
- Copy 2: Recipient (independent contractor or vendor)
- Copy C: Keep in your business records
You can e-File both forms with the IRS. However, keep in mind that e-Filing deadlines may vary. File and send copies of Form 1099-NEC to workers by January 31. For Form 1099-MISC, send the recipient their copy by January 31, and file the paper form with the IRS by March 1 or e-File by March 31.
Along with your paper 1099 forms, file Form 1096, Annual Summary and Transmittal of U.S. Information Returns. Form 1096 is a document that summarizes information returns you file with the IRS, like Forms 1099. If you file both Form 1099-MISC and 1099-NEC, file a 1096 form to accompany both sets of forms. If you e-File Forms 1099, you don’t need to file the summary Form 1096—you only need to worry about Form 1096 when it comes to paper 1099 forms.
What exactly is e-Filing?
E-Filing (aka electronic filing) is the process of submitting forms online instead of paper filing via mail.
Filing forms electronically tends to be quicker than mailing a paper form. Not to mention, e-Filing can be a more accurate option. Electronic filing can potentially catch mistakes and data entry errors before you finish the e-Filing process.
Although there are plenty of perks, e-Filing isn’t the perfect solution. Electronic filings can sometimes be easily lost, especially if your computer crashes or if you forget to back up information.
If you don’t like the idea of e-Filing, you typically can opt for the alternative of mailing in paper forms.
E-Filing 1099s for your business
Now that you have the rundown on 1099s and e-Filing, let’s get into the weeds about IRS 1099 electronic filing, shall we?
The IRS allows businesses to e-File 1099 forms online each year instead of manually printing paper copies and mailing them.
To e-File Forms 1099, businesses can use the IRS’s Filing Information Returns Electronically (FIRE) System. The IRS’s FIRE System allows businesses to file a variety of information returns, including Forms 1042-S, 1097, 1098, 3921, 3922, 5498, 8027, 8955-SSA, W-2G, and of course 1099. You cannot use the FIRE System to file Forms 1094 or 1095.
Who can use the IRS FIRE System?
Anyone with a FIRE System Transmitter Control Code (TCC) who is required to submit any information returns from above can e-File.
The IRS encourages all businesses and individuals to file electronically. Any corporation, partnership, employer, estate, or trust that is required to file 250 or more information returns for any calendar year must file electronically.
If you’re filing Form 1099-MISC, you can also e-File with your state if it participates in the Combined Federal/State Filing Program (CF/SF). Currently, you cannot e-File Form 1099-NEC with the states because the IRS has not yet made 1099-NEC available for the CF/SF program. For more information about the program and filing 1099s with your state, check out the IRS’s CF/SF FAQs.
How to e-File 1099 online
To electronically file your 1099s, you must have software or a service provider that can create the file in the proper format. Keep in mind that a scanned or PDF copy of the form will not be accepted.
Unless someone handles e-Filing on your behalf (e.g., accounting software provider), you must create a FIRE System account and get a TCC. If you do not have a code, submit an online fill-in Form 4419, Application for Filing Information Returns Electronically, to request one.
After you have your 1099s ready, create your FIRE account, and receive a TCC, it’s time to start e-Filing (woohoo!). To e-File your 1099 forms, follow the steps below:
- Go to the IRS FIRE System login page
- Enter your username and password
- Select the Main Menu
- Choose “Send Information Returns”
- Enter your TCC and Taxpayer Identification Number (TIN)
- Select the “Original File” option
- Enter your IRS PIN
- Upload your 1099 document
Keep in mind that the above steps may slightly change over time.
Once you complete the above steps, a page displays a summary of what you submitted. You can file another form by choosing “File Another?” To ensure you successfully submitted your form(s) and check the status, select “Check File Status.”
After submitting your 1099s, you should receive a file status email within a few days. If you do not receive the email, log into your FIRE account and check the file’s status or call the IRS directly.
What to use to e-File 1099s
Again, to e-File 1099s, you need to have them in the correct format. To ensure you have the correct file type and formatting, you can use a software (e.g., accounting) or service provider.
Depending on which route you go, your software or provider may even be able to e-File the 1099s for you. Look into things like cost and what is included when hunting for a hands-free option.
Need help e-Filing Forms 1099 at year-end? Patriot’s accounting software allows you to opt into 1099 e-Filing. File your forms in our software with just a few clicks, and we’ll shoot it over to the IRS and states that participate in the e-Filing program. Give our accounting software a go for free today!
This is not intended as legal advice; for more information, please click here.