At EcomBalance, we are very familiar with Form 1096. That’s because this is the form that you need to use when you hire freelancers. Freelancers are part of the category of contractor. This means anyone you hire who is not an employee.
Form 1096 goes along with Forms 1099-NEC or 1099-MISC, which you or your accountant sends to the Internal Revenue Service (IRS). This is so that freelancers can properly file their personal tax returns.
In this post, we’ll go over the details of this IRS form, like if you need it, where to get it, and what to do with it.
What is Form 1096?
Form 1096 is officially titled the “Annual Summary and Transmittal of US Information Returns”. You file this form alongside other forms that you use to report non-employee income. This form is basically a kind of cover sheet for information returns that businesses send to the IRS about contractors they hire.
Form 1096 is, furthermore, only used when submitting paper forms by mail. This sheet lists all the information that you fill out on other forms like 1097, 1098, 1099, 1099-DIV, 1099-INT, 3921, 3922, 5498, and W-2G.
The IRS defines this form as an information return, which is one of the many types of tax documents. This one is among those that US businesses use to report certain types of business payments. This form is kind of like the version of Form W-3 that you need for freelancers. In addition, Form 1099-NEC is like Form W-2 in that it shows the amounts paid to these independent contractors.
Note that you need a separate 1096 form for every kind of return you file. This means that twelve 1099-MISC forms for twelve people need just one 1096, but one 1099-DIV for a single person still needs its own 1096. You will also have to file electronically if you have over 250 of a certain type of return. Contact the BIR to find out all this before you start working with 1096s.
Who Uses Form 1096?
First of all, you only need to worry about Form 1096 if you are a business registered in the United States. It is a type of tax form that goes to the IRS if you are filing tax returns by mail. This form applies only if you have freelancers on the payroll.
Even if you already have your 1099 tax forms, you may need this to properly file and manage your payroll. You will be better off learning about it now rather than facing the penalties for failing to comply with tax filing regulations.
Where Do I Get Form 1096?
You can see what the form looks like on the IRS website. Do not print that for actual use, however, because you can be penalized for doing that. You need to order your original, scannable Form 1096 from them.
You don’t need to pay for these forms, but you can only order up to a certain number of them. You can get the details on that when you call them to place your order at 1-800-829-3676. Alternatively, you can also place an order through their website. Expect your documents to arrive within 10 business days.
If you use accounting software, check with them before you contact the IRS. They may be authorized to allow you to make and print unlimited 1096 as well as 1099 forms.
Instructions To Fill Form 1096
As the employer, you are responsible for correctly filling out and submitting all the 1096 forms you need. Freelance contractors do not need this form when they file their taxes.
You will first need to enter your information as the person filing. This includes your name, address, telephone number, email address, and a fax number if you have one. You also need to include your business’s Federal Employer Identification Number (FEIN), your Employer Identification Number (EIN), or your Social Security Number (SSN).
Next, you need to count and record the number of forms you are filing with this 1096. Remember that you use a separate 1096 for each type of form. Then calculate and record the total federal income withheld and the total amount reported. This covers all the forms you included with this 1096. The same goes for additional 1096s you fill out to accompany other types of forms. Make sure that all your numbers match as you have them on separate forms.
Finally, put an “X” mark in the box that shows the type of form you are filing the 1096 alongside. Then date and sign it when you’re ready to send everything out.
When and How To File Form 1096
First, make sure that you review all your returns with your accountant or other qualified tax professional before mailing them. You want to ensure accuracy to avoid getting into trouble.
Then, organize the returns you are filing by mail based on the form numbers. Make sure that the Form 1096 for each set of forms is on top. Then you can send them all to the IRS. The exact address you will use will depend on where your business is located. You can check the Form 1096 address page, but contact them to confirm the information.
Remember that you do not use 1096 if you file electronically through the Filing Information Returns Electronically (FIRE) system. You may need to file a different electronic form if you file online.
The deadline for filing falls between January 31 and March 31, depending on the accompanying forms. Usually, the deadline is January 31 when you’re filing a 1096 for Form 1099-NEC, which is for non-employee compensation. Remember that you need to also send Form 1099-NEC to the freelancers and applicable state tax agencies in addition to the IRS. For Form 5498, the deadline is May 31.
Sometimes, the deadline is February 28 for filing via paper mail. This also applies if you are filing Form 1099-MISC to report the applicable vendor payments. This also applies if you are filing other types of information returns like Form 1097. Electronic filing of these isn’t due until March 31.
If you are reporting non-employee compensation, Form 1099-NEC is due to independent contractors, the IRS, and applicable state tax agencies by January 31. The due date for filing Form 1096 is also January 31.
Please make sure to check with your designated office so you won’t be tagged with late filing. The penalty for being late is $50 per form within 30 days and $100 per form for over 30 days from the due date. If you are not squared away by August 1, you will pay $260 per form in penalties. You might even be slapped with $350 per form if the IRS determines that you intentionally failed to file your 1096 forms.
What Is EcomBalance?
EcomBalance is a monthly bookkeeping service specialized for eCommerce companies selling on Amazon, Shopify, Ebay, Etsy, WooCommerce, & other eCommerce channels.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
- Monthly Finance Meeting Agenda
- 9 Steps to Master Your Ecommerce Bookkeeping Checklist
- The Ultimate Guide on Finding an Ecommerce Virtual Bookkeeping Service
- What Is a Profit and Loss Statement?
- How to Read & Interpret a Cash Flow Statement
- How to Read a Balance Sheet & Truly Understand It
The meticulous details of tax filing can be tedious and difficult to grasp. We always recommend that you get expert help, especially when you are dealing with situations for the first time. This post serves as a basic guideline only. Rules and regulations change often, and you always need to check with the appropriate agencies for accurate information before making a move.