Filing taxes can be a big headache for many, considering the plethora of forms and annexures and paper copies one has to submit. Losing yourself in this maze is very likely.
Luckily, we have prepared for you a short and simple guide to maneuver your way through filing one of the most important forms: Form 1096.
Not sure what Form 1096 is or whether it pertains to your taxes? Stop worrying and begin reading. We're sure all your doubts will be cleared by the end of the article.
Form 1096 is an information return form that summarizes the information about any payment that you've made to any recipient for tax purposes. Form 1096 is also titled "Annual Summary and Transmittal of U.S. Information Returns".
If your business has made out any one of the following forms to any recipient in the financial year, you'd have to file a Form 1096.
For instance, if your firm has worked with an independent contractor and paid them $5,000, you'd be sending them a Form 1099-NEC. Form 1096 comes in for summarizing all the Form 1099-NECs that you've paid out over the course of the financial year.
One Form 1096 can summarize only one kind of the seven Forms listed above. For instance, if you've issued seven Form 1097s and two Form 1099s, you'd be filing only two 1096 forms where one summarizes the Form 1097s and the other one Form 1099s.
Usually, small businesses only have to worry about Form 1099s that are sent to independent contractors. A 1099 form is only sent to a contractor when the payment made is upwards of $600.
If at any point in time your firm has issued any one, or several, of the above forms in paper, it is necessary for you to file a Form 1096 and send it to the IRS. However, if your firm has issued these forms via e-file, it obviates the need to fill in Form 1096.
Moreover, if the total tally of the above seven forms filed by your business exceeds 250, then you can only file Form 1096 electronically. If the number is less than 250, then Form 1096 can be mailed to the IRS in paper or filed electronically as well.
Here, you can take a look at Form 1096. It comprises a total of six boxes.
The first four boxes, as you can see, require you to fill in basic information about your business. Remember, it is your information that these boxes require, not the business you've issued a form to.
You can write your Social Security Number in Box 1 if you don't have an Employer Identification Number.
Boxes 5 and 6 require attention. Let's talk about Box 6 first.
Box 6 contains a checklist for the various forms that are summarized via Form 1096. Since we've listed only seven forms that fall under its ambit, you might be confused seeing 34 boxes listed here. But there's a simple rationale behind it.
As you can see, many forms have multiple variants. Form 1120 has 6, Form 1099 has 20 variants, and Form 5498 has 4. The IRS considers each of these variants as one form.
So in effect, if you've filed a Form 1099-A and a Form 1099-MISC, you'll have to fill in two different Form 1096s summarizing each. The key here is to remember that Box 6 will contain only one tick.
We urge you to fill in Box 6 first so that you remember which form's being summarized. This will avoid any error in the total amount you'll have to mention in Box 5.
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If you're planning to send in your IRS Form 1096 via paper, then you'll have to pay close attention to what's being discussed in this paragraph.
You cannot print Form 1096 off of the internet, nor can you photo scan a copy of the same. The reason behind it is that the IRS scans each copy of Form 1096 it receives. They need official, original documents from the firm.
Here are some ways you can get a physical copy of Form 1096:
IRS Form 2553, “Election By a Small Business Corporation,” is required to be filed with the IRS to switch a C Corporation to S Corporation status for purposes of federal taxation
Form 1096, along with Copy As of paper information returns, must be posted to the nearest Internal Revenue Service office from your principal business location. You can find the exhaustive list on this page.
You can also find this information in the instructions printed on the Form 1096 PDF available online.
For the financial year 2020, the due date for submitting Form 1096 summarizing Form 1099-NEC to the IRS is February 1st, 2021. Both must be submitted together.
The deadline for submitting Form 1096 for summarizing any of the other forms is March 1st if you're filing it via paper and March 31st if you're doing it electronically.
The penalty for late filing of the form progresses with time. Submitting within a month of the deadline would cost you $50, after which it doubles. On August 1st, the penalty jumps to $260, and if the information is not filed intentionally, the penalty is a steep $530.
Form 1096 is a summary form that has to be filed if your business has issued any one of Forms 1097, 1098, 1099, 3921, 3922, 5498, or W-2G to anyone in the financial year paying them more than $600.
It's worth remembering that Form 1096 cannot be photocopied or printed off the internet; you have to place an order with the IRS for them. The usual delivery span is given as 10 business days, so order accordingly.
If you've issued the other forms by paper, you'll have to file Form 1096 by paper only.
Lastly, the IRS considers the different varieties of Forms 1098, 1099, and 5498 as different forms, so you'll have to fill in a Form 1096 for each type of those forms if you've issued any. As a small business, though, your main concern would be Form 1099-NEC.
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