Form 1099 Reporting Regulations
Most individuals and businesses do not have a good grasp on when a 1099 is required. Generally, if you are self-employed or own a business you probably have an obligation to file. At last count, there were 16 varieties of the 1099 but by far the most common is the 1099-Misc. A filing is required if you paid over $600 to the following:
- Independent contractors
- Rents
- Legal fees
- Payments to Non-corporate entities – LLC’s, individuals, partnerships
This list is not all inclusive but covers many of the common instances.
If you are unsure if a 1099 is required, gather a list with total amounts paid to each recipient and give your accountant a call. Just because you did not send one last year does not mean you’re correct and in the clear.
In order to file, you need to ask each contractor, vendor or payments recipient to provide a Form W-9. The best practice is to get the W-9 before you issue a payment to a vendor or contractor. Chasing them later (after year end) can consume a lot of time. This form provides all the information necessary to complete the 1099 – legal name, address, taxpayer or entity and Federal identification number
Watch out for a possible penalty flag
In general, Form 1099-MISC is due to the recipient by January 31 and to the IRS by February 28 (March 31st if filed electronically). Penalties range from $30 to $100 per return depending on the tardiness of the filing. However, if the IRS determines that the failure-to-file is due to intentional disregard, the minimum penalty is $250 per 1099-MISC with no maximum. While there are exceptions to the failure-to-file penalties, begging for forgiveness is not a position you want to find yourself in.