In the last post, I shared some basic information on who is subject to report, as well as who is subject to receive form 1099-MISC. If you missed that post, you can find it here.
There are exceptions to the rules listed in the prior post:
- Generally, payments to a corporation. But see Reportable payments to corporations, later.
- Payments for merchandise, telegrams, telephone, freight, storage, and similar items.
- Payments of rent to real estate agents. But the real estate agent must use Form 1099-MISC to report the rent paid over to the property owner.
- Wages paid to employees (These are reported on Form W-2, Wage and Tax Statement).
- Military differential wage payments made to employees while they are on active duty in the Armed Forces or other uniformed services (These are reported on Form W-2).
- Business travel allowances paid to employees (may be reportable on Form W-2).
- Payments to a tax-exempt organization including tax-exempt trusts (IRAs, HSAs, Archer MSAs, and Coverdell ESAs), the United States, a state, the District of Columbia, a U.S. possession, or a foreign government.
- Payments made with a credit card or payment card and certain other types of payments, including third party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC.
There are additional exemptions, but since most small businesses don’t have these types of payments, I have excluded from this post. If you’d like to see the full list of exemptions, the IRS rules can be found at http://www.irs.gov/pub/irs-pdf/i1099msc.pdf.
The following payments made to corporations generally must be reported on Form 1009-MISC:
- Medical and healthcare payments reported in box 6.
- Fish purchases for cash reported in box 7.
- Attorneys’ fees reported in box 7.
- Gross proceeds paid to an attorney reported in box 14.
- Payments to corporations for legal services.
The exemption from reporting payments made to corporations does not apply to payments for legal services. Therefore, you must report attorneys’ fees (in box 7) or gross proceeds (in box 14) as described earlier to corporations that provide legal services.
