Author: Linda Light | April 26, 2024

NOTE: Beacon and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before making any decisions based on this information.

When tax season rolls around, roofing business owners might be looking for the right independent contractor tax form needed to report income to the IRS or to report paying a hired contractor. For small business owners, the most relevant document is Form 1099-NEC, which might be the right form for you and your business or for an independent contractor you hired to complete a specific job.

Use Form 1099-NEC when you have paid an independent contractor $600 or more throughout the entire year. The IRS uses this form to independently verify income and federal income tax levels.

Employee vs. Independent Contractor

An independent contractor is someone you hire on a contract basis to complete a specific project; they are not full-time salaried or hourly employees.

In general, workers you hire are not independent contractors if they perform services that can be controlled by an employer (what will be done and how it will be done). The IRS defines employee and independent contractor status in more detail.

Sometimes, a small business must file as an independent contractor if it meets the requirements. An independent contractor tax form must be completed as part of your tax filing process for sole proprietorship or partnerships, but not for C corporations or S corporations.

For example, if you hire a welder who operates as a sole proprietor, and you pay them $1,000 over the course of a year for their work, you will send them a Form 1099-NEC at tax time. However, if you paid this individual $450 over the course of the year, you don't need to send them an independent contractor tax form.

If you hire a company called Roofers, Inc. (the "Inc." is generally used for corporations), whether you pay them $450 or $1,000 over the course of the year, you are not required to file a Form 1099-NEC, since the business is a corporation and not an independent contractor.

Filing Form 1099-NEC for Independent Contractors

The information needed to produce a 1099 for each independent contractor includes:

• The total amount paid to that person or business during the tax year.
• Their legal name and address.
• Their taxpayer identification number.

This information can be found on a W-9 form, which you should have on file for each contractor.

Copy A of Form 1099-NEC goes to the IRS by January 31 whether you're filing electronically or by mail. Copy B goes to the independent contractor no later than January 31. If you file a physical form of Copy A to the IRS, you also need to submit Form 1096 along with it.

Check with your accountant or tax advisor if you need to file 1099 forms with your state or if you're uncertain about your filing status or deadlines.

Filing Independent Contractor Tax Forms Online

You can e-file Copy A to the IRS through the IRS Filing A Return Electronically (FIRE) System. You must follow the IRS rules and guidelines, such as using software that will format the forms correctly (the IRS does not accept PDFs or scans). The FIRE system also requires a transmitter control code (TCC), which can be requested from the IRS using Fill-In Form 4419.

For Copy B, which goes to the independent contractor, you can email the form as long as you have their consent to do so. Ask for permission to email in a way that proves the contractor can receive the form electronically (e.g., for email, contact them via email following the IRS rules).

The main security concern is tax scammers who impersonate the IRS. You should know that the IRS doesn't initiate contact with taxpayers by email, text messages or social media to request personal or financial information — only by mail.

Are You the Independent Contractor?

If your business is considered an independent contractor, then it is not your role to complete or file Form 1099-NEC: You simply receive the form during tax time and use it to report your income. You are only responsible for filing these forms if you hired a contractor and paid them more than $600 in a year. The payer is always the one who fills out the form.

If you hire an independent contractor through a third party (or if you are hired through a third party), it is that company's responsibility to file independent contractor tax forms.

However, whether you receive a 1099 or not, you still need to report all of your income on your income taxes.