Business owners who hire employees on a freelance or contract basis are required to send the Internal Revenue Service a Form 1099-MISC for each individual who earns at least $600 during the tax year. The types of employees who should receive these forms include any employees who are not full-time staff members but who are compensated for their work.
Employers must mail 1099-MISC forms to their contract employees and to the IRS. The deadline for sending forms to employees is January 31 and the deadline to send copies of the 1099 forms to the IRS is the end of February. The IRS has penalties for employers who miss these deadlines.
Obtaining Employee Information: Filling out the W9
When you hire a freelance or contract employee, basic tax information is collected using a W9 form that is available from the IRS. The form asks the contractor’s name and the name of their business if it’s different, their Social Security Number or Tax Identification number. The W9 also asks the worker to sign the form to certify that they are exempt from backup withholding taxes. Most employees are exempt, but if they aren’t, it’s the company’s responsibility to withhold income tax from the contractor’s pay at a flat rate and send it to the IRS.
Sending Out 1099 Forms Without a Social Security Number
The IRS says every person required to file an income tax return is required to furnish his or her Social Security number or taxpayer identification number to their employer. If the contractor or freelance worker did not fill out a W9 form and you can’t obtain that information prior to the filing deadline, you may send a 1099 form to the contractor and the IRS without it. However, you should be aware that the IRS will charge you a penalty for submitting an incomplete form unless you can show there was a reasonable cause for omitting the Social Security or tax identification number. You must also be able to show that you acted in a responsible manner and took steps to avoid the omission of this information, such as by writing the contractor to ask for this information. Failure of the worker to return a completed W9 form is typically considered grounds for exemption.
How to File a Corrected 1099 That Includes the SSN
Once you have the Social Security or tax identification number, you must fill out a corrected 1099-MISC and add an ‘X’ in the ‘Corrected’ box at the top of the form. Fill out the form adding the corrected information and Social Security number. You will also need to write a letter to the IRS explaining that the Social Security number was missing along with your own tax identification number.
Frances is a business writer with over 15 years experience writing about media, technology, retail and related issues for a variety of national and international publications including The New York Times, The Week, USA Today, The Independent, and Lonely Planet News. Follow her on Twitter at @francesk