Taxing issues: 1099 Forms
Income other than wages, salaries and tips. A business or organization is required to provide a Form 1099Form 1099 is an information return used to report i to each unincorporated recipients of miscellaneous income to whom it has paid at least $600 during the calendar year, for services performed in the course of conducting their business. Some examples of payments reportable on Form 1099 are: rents, leases, royalties, commissions and contract labor. A business is required to file a Form 1099 for payments to attorneys of $600 or more, whether their business is incorporated or not. A Form 1099 is also required if a business or organization made interest payments of $10 or more during the calendar year.
If a business or organization has made payments as previously described to foreign taxpayers, it may be required to file Form 1042-S to report to the IRS and the recipient amounts paid and withheld. This includes payments made to Canadian residents. Reporting is required regardless of the amount or the form of ownership (sole proprietor, partnership, or corporation).
In order to file the form 1099 you need the recipient’s Employer Identification Number or the sole proprietor’s Social Security number. It is best if you attain this prior to payment as the form 1099 is required to be provided to the recipient by Jan. 31 of the following year and to the IRS by Feb. 28. Along with a copy of each 1099 you are also required to send the 1096 transmittal form to the IRS.
What is the big deal with filing form 1099? Well, the IRS wants to make sure that if you are deducting payments on your return, that someone else is picking those payments up as income. In order to encourage businesses to properly file 1099s the IRS has recently increased the penalty for non-filers. The penalty varies depending on how late the 1099s are, but the max is $100 per 1099 required up to $500,000 for small business filers.
Please review your records to be sure you are in compliance with the current filing requirements. If you have any questions we would be happy to help. F
Dana Fisher is a CPA with Galusha, Higgins & Galusha (GHG) based in Havre, MT. The office specializes in farm and ranch tax planning and preparation. Contact Fisher at PO Box 1530 Havre, MT 59501; call 406-265-3201; or e-mail firstname.lastname@example.org.