As a business or rental owner, you are required to send 1099-Misc. forms to individuals and businesses for services they provided, if the total comes to $600 or more for the year. The $600 limit is per year, not per job. These services provided to you can include computer repairs, contract labor for a job, janitorial services, snow plowing, building repairs, attorney fees, etc. The list of services is endless.
Now I’m sure some of you are talking to your computer saying, “But wait a minute, we don’t have to send them to corporations.” and you are 100% correct. There is an exception that allows you to not have to file them for corporations that provided services; however there is a lot of confusion out there as to whether or not someone is a corporation. Often times, someone will see “LLC” on a business name and think that’s a corporation, but unfortunately, that’s not correct. An LLC can choose to be treated as a corporation, but unless you attain the proper documents when you hire them, there is really no way for you to know how they are taxed.
Special Rule: You are still required to send a 1099 to attorneys, even if they are a corporation.
(1099s are also required for royalties, rents paid, other income, medical payments made, interest, etc. For additional filing requirements, please reference the 1099 filing instructions on the IRS website or contact our office for more information.)
When you hire someone for a service, for 1099 filing requirements you should be getting a completed W9. (There are other things you should be getting as well, but this is all that’s required for 1099s) This W9 will provide the individual’s or business’ legal name, address, their identification number and their type of business. This will allow you to determine if they are subject to receive a 1099 and if they are, it provides you all the information to do so in January. It is SO much easier to collect these up front, before you pay for the service, rather than to try and collect the information the following January. Sometimes people move, close businesses or even try to dodge claiming income, so it can become quite difficult to get this information after-the-fact.
1099s are now required to be filed by January 31st each year with the recipients and the federal government. The state copies are not due until February 28th.
When preparing a tax return for a business, farm or rental, we are required to answer 2 questions regarding 1099s. #1-Were there any 1099s required to be filed? #2-If so, were they or will they be filed? Sometimes we will notice that there was a requirement for 1099s to be sent and we will complete these during the tax return preparation to meet the filing requirements, however they are often done late because we aren’t working on that return until March or even during summer under extension. If you do not file those 1099s timely, or do so late, there are penalties that will be assessed by the IRS. In the past, it was pretty rare to see someone actually assessed these penalties, however the IRS is being more and more prudent about assessing and collecting them. It is important that you file these on time or if you need help to get them filed, you contact us in January, BEFORE we are doing your tax returns.
The IRS penalties imposed on 1099s that are filed after the due date, January 31st , are as follows:
$30 per 1099 that are late filed within 30 days after the due date.
$60 per 1099 that are late filed more than 30 days after the due date, but by August 1st.
$100 per 1099 that are late filed after August 1st.
If you have any questions on 1099 filing requirements or need assistance in getting your submitted, please contact our office and we will be glad to help you.
Thank you,
Jessica Sturzen
Accounting Consultant