1099 Tax Form Q&A

Are you required to file a 1099 tax form?

As a general rule, you should issue a Form 1099-MISC to each person or unincorporated business to whom you have paid at least $600 in rents, services (including parts and/or materials), prizes, awards, medical and health care payments, royalties (at least $10), and other cash payments, in the course of your trade or business during the calendar year. 1099s should be issued to individuals, partnerships, limited liability companies, limited partnerships, nonprofit organizations, government agencies, and certain other groups. There are some general exceptions to the requirement that you must issue a Form 1099 which are detailed below.

What happens if you don’t file your required 1099s?

Starting on January 1, 2020, the penalties for not issuing the required Forms 1099 can vary from $50 to $550 per form, depending on how long past the deadline the company issues the form. If a company intentionally disregards the requirement to provide a correct payee statement, it is subject to a minimum penalty of $550 per statement, with no maximum. These penalties are subject to inflationary adjustments.

Exceptions to filing Form 1099-MISC

Some payments do not require you to file a 1099 tax form. Below is a list of payments, not all, for which a Form 1099 is not required to be filed:

  • The vendor is a corporation (including LLCs treated as an S or C corporation)
    • Unless these payments are for medical and health care, attorney’s fees, fish purchases for cash and substitute payments in lieu of dividends or tax-exempt interest
  • Rent payments to real estate agents
  • Sellers of merchandise, freight, and storage
  • Employee wages (use a W-2 for this instead)

What information do I need?

Request a Form W-9 from your vendors. This form requires the vendor to list out all the details that you will need to report on the Form 1099 you will issue to that vendor. For example, legal business name of recipient, EIN/SSN, business address, contact person and telephone number, etc. Keep a copy of all Forms W-9 collected for your records.

Where and when do you file?

The filing deadline with the IRS for Form 1099-MISC, reporting non-employee compensation in box 7, is January 31, 2020. For all other reported payments, file Form 1099-MISC by February 28, 2020, if you file on paper, or March 31, 2020, if you file electronically. However, all Forms 1099 need to be in recipients’ hands by January 31st, 2020. If you are paper filing, paper forms can be obtained through your nearest IRS branch office, office supply wholesaler, or local post office. You will have to purchase a valid software in order to file your 1099 forms online.

Avoid the hassle of preparing and filing these forms by consulting your tax advisor at MKS&H. We will ensure that you meet all the filing requirements and that your vendors receive a copy of their 1099 on time!

About MKS&H: McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by putting complex financial data into truly meaningful context. But deeper than dollars and data, our focus is on developing an understanding of you, your culture, and your business goals. This approach enables our clients to achieve their greatest potential.

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