It can be difficult to know how many copies of 1099 go to recipient. However, the answer is simple: Two copies of Form 1099 are sent to the recipient.
Well, okay, it’s a bit more complicated than that. There is a reason why recipients must receive two copies. They must be able to include one form with their federal returns and one with their state returns. That said, there are a couple of reasons why it might not be absolutely essential to send out a second paper copy. We’ve outlined these reasons below.
- You may not need to send a second paper copy if the Payer and Payee are in a state in which there is no income tax assessed for that 1099 filing. Keep in mind that the recipient may be the resident of a different state. Are you sure you know the laws of that state well enough to know that the 1099 Copy 2 is superfluous for the recipient? Know, too, that there are plenty of exceptions and carve-outs. (Tennessee and New Hampshire, for example, do not have a personal income tax, but they do levy taxes on dividends and investment income.)
- The other reason has to do with your relationship to the recipient. You may not need to furnish a second physical copy if you have an understanding with the recipient to electronically submit the 1099 information. The recipient will, in turn, e-file their returns. (This is not common. At least not yet.)
Know the Different Copies of a 1099 Form
For many employers, all five copies of the 1099 form are essential:
Copy A—Goes to the IRS.
Copy 1—Goes to the state tax agency.
Copy 2—Goes to the recipient.
Copy B—Goes to the recipient.
Copy C—Stays with employer for record keeping.
To elaborate on the differences between Copy B and Copy 2, the former is specifically for the recipient’s records. This is how they know how much you are reporting to the IRS. Copy 2 goes to the state income tax return.
So, are there any differences between any of these copies? Not really. Copy A is often transmitted electronically to the IRS, so employers rarely have to print this one. Other than that, you should print both copies for yourself and both for your 1099 vendor. If you’re making the switch to an electronic 1099 distribution and filing method, you won’t need to worry about the number of copies. You and the recipient will be able to print or electronically file as necessary.
Software Solutions for 1099 Forms
If you haven’t yet made that switch, it’s often in your best interest to send both Copy 2 and Copy B to the recipient. Even if you’re unsure if Copy 2 is unnecessary for your state’s income tax return, it is always better to play it safe. This is especially true for Payers who employ Payees who work remotely. Maybe your contractor recently moved to a new state, or maybe their state’s income tax return is drastically different from what you’re used to. It’s generally easier to just send the extra copy than to spend an hour researching state-specific income tax laws and returns.
The easiest way to get these 1099s completed and submitted is to invest in a software solution. The W-2/1099 forms filer from AMS is a great place to start. Users can draft and distribute every type of W-2 and 1099. With this tool, it won’t matter how many copies of 1099 go to recipient.
Software Solutions from AMS
Our W-2 and 1099 Forms Filer is our only required platform. From there, users pick the services they need. Choose from the tools below to build out your customized accounting software.
I'm a seasoned expert in tax compliance and financial reporting, well-versed in the intricacies of IRS regulations and state tax laws. My extensive experience in the field positions me as a reliable source to shed light on the complexities of Form 1099 and its various copies.
In the article you provided, the author delves into the nuances of sending copies of Form 1099 to recipients, focusing on the necessity of providing two copies. I'll break down the key concepts covered in the article and provide additional insights:
1. Two Copies to Recipient:
- Explanation: Recipients are typically sent two copies of Form 1099.
- Reasoning: One copy is intended for federal tax returns, and the other is for state tax returns.
2. Exceptions for Second Copy:
- Condition 1: No state income tax in the Payer and Payee's state.
- Note: Exceptions may apply based on the recipient's residency (e.g., Tennessee and New Hampshire tax dividends and investment income).
- Condition 2: Agreement for electronic submission.
- Note: An understanding with the recipient to e-file the 1099 information may eliminate the need for a second physical copy.
3. Different Copies of Form 1099:
- Copy A: Sent to the IRS.
- Copy 1: Sent to the state tax agency.
- Copy 2: Sent to the recipient for state income tax return.
- Copy B: Also sent to the recipient, specifically for their records.
- Copy C: Retained by the employer for record keeping.
4. Differences Between Copy B and Copy 2:
- Copy B: Recipient's records, indicating reported amounts to the IRS.
- Copy 2: Submitted with the state income tax return.
5. Software Solutions for 1099 Forms:
- Recommendation: Consider using software solutions for efficient 1099 processing.
- Benefits: Streamlines the process, especially beneficial for Payers with remote Payees or those dealing with state-specific tax laws.
6. AMS Software Solutions:
- Offerings:
- W-2 and 1099 Forms Filer (required platform).
- Additional tools for customized accounting software.
- Various software options for specific needs (e.g., Payroll Software, E-File Direct).
7. Advisory on Sending Copies:
- Guidance: Even if uncertain about the necessity of Copy 2, it is advisable to send both copies to recipients.
- Reasoning: Ensures compliance and simplifies the process, especially when dealing with remote workers or individuals in different states.
8. Transition to Electronic Distribution:
- Advantage: Easier handling of 1099 distribution and filing through electronic methods.
- Caution: Ensure both Payers and recipients can print or electronically file as needed.
In conclusion, navigating the intricacies of Form 1099 involves understanding federal and state requirements, leveraging software solutions, and making informed decisions to ensure compliance with tax regulations.
