A Simplified Summary to 1099 Filing Requirements for Your Business

Wondering if You Need to Be Filing 1099 Forms for Your Business?

    The IRS has begun focusing heavily on taxpayer compliance with 1099 reporting laws. Penalties have increased sharply.  Penalties for failure to file correct information returns may apply if you don't file a correct information return by the due date and a reasonable cause is not shown or if you fail to report a taxpayer identification number or report an incorrect TIN.

    The penalties depend on how late the correct Form 1099 is filed and can range anywhere from $50 per return to $260 per return. The per-failure penalty is $530 for a taxpayer who intentionally disregards the filing requirements for information returns and payee statements.

Who Must File 1099 forms?

    Generally, any person, including a corporation, partnership, individual, estate, and trust, who makes reportable transactions during the calendar year must file information returns and furnish statements to the recipients of the income.

Who Gets a 1099-Misc?

    Form 1099-MISC is probably the most filed form of the 1099 series. You must file Form 1099-MISC, Miscellaneous Income, for each person (subject to the exceptions listed below) to whom you paid during the year:  (1) at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest; (2) at least $600 in rents, services (including parts and materials), prizes and awards, other income payments; or (3) gross proceeds of $600 or more paid to an attorney.  You must report payments on Form 1099-MISC only when the payments are made in the course of your trade or business; personal payments are not reportable.

Any Exceptions?

    Some payments are not required to be reported on Form 1099-MISC, although they may be taxable to the recipient.  You are not required to report a payment to a corporation unless it is a law corporation.

    Unless you specifically engage me to prepare your 1099s, you are responsible for preparing and filing Forms 1099. If you are audited, the IRS will want documentation of expenses and will look at whether 1099s were filed.

    There are many other types of information returns that you may be required to file depending on the types of activities in which your business engages. Please call or email me with any questions.