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ISDANER TAX ALERTS
IMPORTANT REMINDER: 1099 Reporting Requirements
Filing Forms 1099 by business taxpayers is not new. However, starting with the 2011 tax year, several business returns and schedules (including Forms 1120, 1120S,1065,1040 Schedule C) now ask questions relative to the filing of these forms. In addition to interest, dividends and other specific payments, businesses may be required to file Form 1099-MISC for a number of expenditures.
Who Must File Form 1099-MISC?
Generally, any trade or business that makes payments of at least $600 during the year for services (including legal, accounting, and directors' fees), rent, prizes and awards, other income payments and medical and healthcare payments. Royalties of $10 per year are also covered. Although nonprofits do not operate for gain or profit, they are considered to be engaged in a trade or business and are subject to the reporting requirements. Payments for goods or any personal expenditure are not subject. Also, the mere receipt of rental income from real estate does not constitute a trade or business and, therefore, reporting is not required for this activity.
Who Must File Receive 1099-MISC?
All vendors, independent contractors and service providers except corporations must receive Form 1099-MISC. Individuals and partnerships will receive the Form. The exception for corporations does not apply to payments of legal fees or medical and health care. Because LLC's may be taxed as different types of entities (partnerships or corporations or disregarded for tax purposes), they are only excluded as recipients when they are documented as corporations.
Statements to Recipients
If Form 1099-MISC is required to be filed, the service provider must be furnished a statement. The payer must include the telephone number of a contact person on the recipient's copy of the Form. Generally, Copy B of Form 1099-MISC must be furnished to the recipient by January 31 of the year following the calendar year for which the return is required to be filed.
Steps to Take to Prepare Form 1099-MISC
You should request that your vendors, contractors and other payment recipients submit to you a Form W-9. The Form W-9 will provide you with the legal name, address and taxpayer identification number for the vendor, which is the information needed when preparing Form 1099-MISC. It will also indicate the tax status of any LLC.
When to File- Timing
Form 1099-MISC must be filed with the IRS by February 28 of the year following the reporting year. Electronically filed returns do not have to be filed with the IRS until March 31.
These are general guidelines. If you need more information or have questions about Form 1099 reporting requirements, call our tax professionals at 610.668.4200 or visit the IRS website
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