Can I Enter Federal Withholdings on a 1099?
Many small-business owners must issue 1099 forms to people they have contracted with for work or projects they have outsourced. An Internal Revenue Service Form 1099 can be used for a variety of purposes, and there are several different types to choose from depending on the situation. Most small-business owners will primarily use a Form 1099-MISC, but you should check to be sure you have selected the correct form for the situation.
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When to File a 1099
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A Form 1099 reports income that is not reported on a W-2. You may issue a 1099 to an independent contractor. If you pay rent or you pay royalties to someone you will need to issue a 1099 statement. If your company pays interest or is publicly traded you will need to issue 1099 forms as well. There are specific 1099 forms for each situation, and you should check with your accountant or the IRS before issuing your 1099 statements.
Withholding Taxes for a 1099
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Generally, you do not need to withhold taxes when you issue a 1099 statement. Instead, you will pay the amount you owe the person and he is responsible for paying the taxes owed on the money. You will need the person's tax identification or Social Security number to file the 1099 correctly, and if he will not give you this information, then you are required to withhold 28 percent of the amount you would pay and give it to the IRS. This is the amount to report on the Form 1099.
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Enter Withholding Amount
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When you fill out the 1099, you should follow the specific instructions for your form. You are required to report if you pay an individual more than $600 or if you pay more than $10 in royalties to someone. The form calls for the tax-withholding information to be listed in Box 4 of the statement. Enter in all other applicable information before you submit the form.
Submitting the 1099
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Forms need to be mailed to the individuals by the last day in January. If you are issuing more than 250 1099 forms you will need to file the forms electronically with the IRS. You can do this even if you are filing just a few forms. You must apply to have access to do this. The application takes a month to be approved, so you need to apply a month before the April deadline to submit the forms to the IRS.
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