As business owners, we are required to file 1099 forms for vendors we’ve paid if the purchases and those who have been paid fall into certain categories. These forms are due to the recipient by January 31, and to the IRS by February 28 (if filing paper documents) and March 31 if e-filing.
Many entrepreneurs are confused on who to issue the forms to, so this post will give information which will help you determine which vendors need to have the 1099-MISC form issued to them.
Keep in mind the forms are issued by your business for expenses in the course of doing business only. You are engaged in a trade or business if you operate for gain or profit. Do not include any amounts that would be paid personally. For instance, if your business pays someone to do landscaping outside your office, that is a business expense and should be reported (if the vendor is subject) but a landscaper paid personally for working in your yard at home is not subject to receiving a 1099.
Please also note that nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements. Other organizations subject to these reporting requirements include trusts of qualified pension or profit-sharing plans of employers, certain organizations exempt from tax under section 501(c) or (d), farmers’ cooperatives that are exempt from tax under section 521, and widely held fixed investment trusts. Payments by federal, state, or local government agencies are also reportable.
According to the IRS instructions, file Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year:
- At least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish, or, generally, the cash paid from a notional principal contract to an individual, partnership, or estate;
- Any fishing boat proceeds; or
- Gross proceeds of $600 or more paid to an attorney.
In addition, use Form 1099-MISC to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment. You must also file Form 1099-MISC for each person from whom you have withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.
There are exceptions to the rules which will be covered in the next post.
If you need help with your 1099 processing, give us a call at 310-534-5577 or send an e-mail to [email protected]. We look forward to hearing from you!
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