Form 1099 Filing
Requirements
Are you required to issue a 1099?
There are a number of
variations of the IRS Form 1099 which you may be required to file as part of your business
activity. Knowing which ones are required is not only important, but
properly filing them on time can save you from having to pay penalties.
The most common form
is Form 1099-MISC. Generally, this form is required anytime you pay
someone $600 or more for services (including parts and materials), rents,
prizes and awards, other income payments, medical and health care
payments, crop insurance proceeds, or cash payments for fish you purchase
from anyone engaged in the trade or business of catching fish. This form
is also required for gross proceeds paid to an attorney. Royalty payments
of $10 or more are also required to be reported on Form 1099-MISC. Only
report payments made in the course of your trade or business. Personal
payments are not reportable.
In most cases, a Form
1099-MISC is not used for payments that are made to employees. Generally
all payments made to an employee are reported on their W-2 as additional
compensation. This may include business expense reimbursements or other
fringe benefits. Prizes and awards paid to employees are also reported on
their W-2. If you pay your employee rent for the use of equipment that the
employee uses to perform services for you, this income should be reported
on Form 1099-MISC as rent payments.
A penalty of $50
per statement is assessed for failure to file a correct 1099-MISC on which
you cannot show reasonable cause. The penalty also applies if you fail to
provide the statement to the payee by January 31. It is important to have
the payee’s correct taxpayer identification number, name, and address. A
Form W-9 can be used for this purpose. Failure to obtain a correct
taxpayer identification number could result in back-up withholding.
