Form 1099 covers royalties, rent, self employment or independent income, insurance and other miscellaneous incomes. In short, it gives a report on the year-end compensations given to all non-employees.
There are certain different forms for different individuals stated by the Internal Revenue Service (IRS) which needs to be reported by independent contractor, sole-proprietors, freelancers, etc. The Form 1099 MISC is issued by a business or a client who pays miscellaneous incomes to individuals on their services.
A client is required to generate Form 1099-MISC if the amount paid to the non-employee is more than $600 during a tax year. If the amount is less than $600, no form is required to be filed. Also, as per IRS a client has to issue Form 1099 to the non-employee by 31st January of the following year and has to file a copy of the same to IRS by the last day of February or March (as per the guideline.) It’s noted that personal payments are not included in this form.
Form W-9 contains all the information about a non-employee, like his/her name, address and taxpayer’s identification like his/her Social Security number. It also has the Foreign Account Tax Compliance Act (FATCA) code and US citizenship mentioned as well. A client is obliged to get this form before generating Form 1099-MISC as per IRS.