Lots of questions this past week about who should be receiving Form 1099s! Knowing when to send a Form 1099 to vendors can be confusing, but it is very important to get it right. Failure to file a correct information return may result in penalties, which can be as much as $100 per missing or incorrect form. In addition, there is now a question on the income tax return confirming all required 1099s were filed, which must be signed by an officer of the company.
Below is information to assist you with filing your 1099s. The rules for information returns are lengthy and the information below does not cover everything.
A 1099-MISC must be filed if your company makes payments for services totaling over $600 or more in the year to non-corporate entities. A non-corporate entity could include an individual sole proprietor, a partnership, or a limited liability company (LLC). Some examples could be, but are not limited to:
– Rent paid to your landlord
– Your lawn maintenance company
– Job contractors
– Your plumber, electrician, air conditioner man
– Your cleaning company
– Other independent contractors
A 1099-MISC needs to be filed for payments to all attorneys, even when they are a corporation. A 1099-MISC does not need to be filed for payments made to any other corporations.
It is a best practice to always collect Form W-9 from your vendors before making any payments to the vendor. This will protect you and ensure you have all the information you need from them when preparing your 1099s at the end of the year. If you are not using the IRS Form W-9 revised in December 2014, please obtain that from the www.irs.gov website.
You should retain indefinitely the Form W-9 to support your filing or lack of filing a 1099.
If you are unable to get the EIN of your vendor, the IRS requires you to withhold 25% from any payments you make to that company or person. This is referred to as backup withholding the the IRS holds you responsible.
Please note that all payments to an employee should be reported on their Form W-2.
If you have further questions, you can read the instructions on the IRS website (www.irs.gov) or call us here at Hurst & Hurst CPAs. We would be glad to assist you in any way.