This article covers US tax requirements and applies to Wave Payroll in the US.
Filing deadlines for the 2019 tax year:
The deadline to e-file your 1099-MISC forms with Wave is January 27, 2020.
If you prefer to file your 1099-MISC forms with the IRS manually, the deadline to file and provide 1099s to your contractors is January 31, 2020.
Form 1099-MISC is an IRS form that summarizes all compensation your business has paid to a non-employee worker or contractor. Independent contractors use these forms to file their taxes.
What do I need to do?
You must send Form 1099-MISC to any contractors you have paid more than $600 to during 2019. This is not limited to individual contractors: the requirement extends to partnerships and LLCs. Corporations are excluded.
How do I get 1099-MISC forms from Wave?
If you use Wave Payroll, you can generate a 1099-MISC form for every contractor you’ve marked as a 1099 Contractor and paid more than $600 in a calendar year. This applies to all contractors you’ve paid more than $600 to using direct deposit, cash, check, or bank transfer.
In order for 1099 contractor bills paid by Direct Deposit to appear on Form 1099-MISC, you must have Account Mapping set up in Wave. To set that up, click Settings at the bottom of the left-hand navigation menu and select Account Mapping. In the Funding Account field, select the bank account that you use to pay contractors with, by direct deposit. Click Save. Note: if you can't find the correct account, you can set that up from the Chart of Accounts.
Wave offers e-filing for 1099-MISC forms. This is available to employers in all US states. Generating tax forms is included with your payroll subscription fee and e-filing for 1099-MISC is available at $5 per contractor/form.
How to Generate a 1099-MISC in Wave:
- Click Payroll
- Click Tax Forms
- Click Generate next to the 1099 you would like to file
- Review and confirm the details of yourself, as the Payer and of your 1099 contractor, as the Recipient, including their total compensation for the tax year
- Click Confirm & Continue
- On the following page, proceed to Step 3 and click E-file your tax forms now. When selected, Wave will handle e-filing on your behalf, for this 1099-MISC form.
- Repeat these steps for remaining 1099 contractors.
After 1099-MISC forms are generated, download Copy B and give it to your contractor. Copy C is available for your records.
If you prefer, you can also file manually with the IRS.
What’s the deadline?
The deadline to send 1099 forms to your contractors is January 31. This is the same date as the deadline for W2 forms for your regular employees.
The penalty for missing this deadline varies, but can range from $30 to $100 per form, to a maximum of $500,000 per year. If you neglect to send any 1099 forms, fees can go as high as $250 per form.
If Wave is e-filing 1099-MISC forms on your behalf, the deadline is January 27th. If you choose to e-file with Wave after this date, Wave can’t guarantee that you will meet the filing deadline.
Frequently Asked Questions
What about the Form 1096?
The IRS Form 1096 is an "Annual Summary and Transmittal of U.S. Information Returns". This form is required when submitting paper forms, including the 1099-MISC, to the IRS. Form 1096 is not sent to recipients.
You do not need to use Form 1096 if you are filing 1099-MISC forms electronically. This means if Wave is submitting 1099-MISC forms on your behalf, a Form 1096 is not required.
When I generate the 1099-MISC, why is there $0.00 compensation in Box 7?
This message means that the system is not locating any bills or bill payments dated for the tax year you're generating the form for. This can be resolved by having a look at the following:
- Step 1: Make sure all contractor bills have correct dates
- Go to Purchases > Bills. Select any bill to review the Date.
- For example, if you expect the bill amount to be included on your 2019 1099-MISC form, then the bill date should be within 2019. If it's not, the bill will not be reflected on the 2019 1099-MISC form.
- Step 2: Next, make sure the bill is Paid.
- If the bill is outstanding, check out this guide on adding and paying contractors for how to Record a Manual Payment. Make sure the bill payment is also dated correctly.
- Step 3: Check the bill Payment Method
- Only Bank Payment, Cash, Check or Direct Deposit payment methods will be reflected on the 1099-MISC Form
- This means, payments made to contractors by Credit Card, Payment Card or other companies that process payments (e.g. Google Wallet, PayPal, Venmo, etc.) are not reported on the 1099-MISC form.
"Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC." Source: IRS Instructions for Form 1099-MISC
1099-MISC or 1099-K? Depending on your business, you may file just one, or both. You can learn more about the differences between these forms here and Wave offers answers to some 1099-K frequently asked questions here.