Form 1096: How to use the 1096 form for contractor compensation

Do you operate or own a small business that employs independent contractors throughout the year? Do you also use paper filing to file your tax forms? If so, you’ll want to hear about Form 1096.

You can think of IRS Form 1096 as a cover sheet of sorts. It is used for reporting non-employee compensation to the Internal Revenue Service. Read all about the 1096 form, including what it is, who files it, and how to file it below…

What is Form 1096?

As a small business owner, you are probably well-versed in 1099 forms like Form 1099-NEC or the 1099-MISC form. These are and were the forms to send to independent contractors and vendors to whom you pay more than $600 per year. So, what is Form 1096, and how is it related to contractor compensation?

Form 1096 is officially titled the “Annual Summary and Transmittal of U.S. Information Returns.” It is, as the name implies—a summary of non-employee compensation.

This document summarizes information for certain informational returns that apply to small business owners:

• Form 1099 (MISC and NEC)
• Form 3921
• Form 3922
• Form W-2G

But there’s a catch. This document is only used when you’re filing an informational return via mail. It is not used when electronically filing or filing through a tax software program.

Here’s a quick example. Say you hire an independent contractor to help with your business. You pay them $5,000. You then send them Form 1099-NEC to notify them of the amount you paid to them. But you’ll also file Form 1096 with the IRS to summarize information on the 1099-NEC.

A word to the wise—you could file multiple 1096 tax forms. In fact, you should submit a separate Form 1096 per informational return (see the items in the list above). So, if you had two employees in addition to your one independent contractor, you would mail a Form 1096 with the Form 1099-NEC, and you would mail a Form 1096 with the two W-2s.  

Who files IRS Form 1096?

This form is exclusively for any business owner who files paper Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G. If you file any of those forms—and paper file—you’ll likely have to file IRS Form 1096. Employees don’t need to file this form.

Form 1096 instructions

The 1096 tax form is a one-page document with multiple parts.

In part one, you’ll need to fill in your:

• Business name
• Business address
• Employer Identification Number (EIN) / Social Security number
• Name of person to contact
• Email address, phone number, and fax number
• Total number of information tax returns transmitted with this form
• Federal income tax withheld
• Total amount of reported payments

In part two, you’ll fill in the type of document you’ll attach to Form 1096. There should only be one “X” marked, as you have to file a separate Form 1096 for each corresponding form.

This form also requires you to fill out a signature, title, and date.

Where to get Form 1096

You can order Form 1096 from the Internal Revenue Service (IRS) or call during normal business hours to request it. You cannot download this document from the IRS website. The official printed version of Form 1096 is scannable and read by a machine using optical character recognition equipment. You cannot file Form 1096 or Copy A of Forms 1099 or 3921 that you print from the IRS website.

Sound like a lot of work? Don’t let these filing needs and Form 1096 requirements keep you from running your business! Our small business certified tax pros can help you manage and file required tax forms and avoid any penalties.

When to file: Deadline for Form 1096

File Form 1096 alongside the 1099-NEC to the IRS by January 31 for the previous tax year. Most likely, you’ll already have what you need to complete it by this date. This is because you must send your contractors their Informational returns by January 31.

Get more help with small business taxes

Your team of local small business certified tax pros is ready to help. Make an appointment with your tax pro. There are options to visit in person, drop off your paperwork, or meet virtually.

We also offer bookkeeping, payroll, business formation, and beneficial owner reporting services year-round. Let Block Advisors help you manage your small business to-do list, so you can get back to doing what you love.  

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