Reporting Income Payments Using Form 1099-MISC

Form 1099-MISC is used to report payments made in a trade or business.

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Form 1099-MISC is used to report certain types of payments made in the course of a trade or business. If you're in business or self-employed, you may need to submit this report to both the Internal Revenue Service and the person or business whom you paid.

When is Form 1099-MISC Required?

Businesses will need to fill out a Form 1099-MISC for persons, vendors, subcontractors, independent contractors, and others in the following circumstances:

$600 or more per year is paid for

  • cash payments to fishermen
  • crop insurance proceeds,
  • medical and health care payments,
  • prizes and awards,
  • proceeds paid to attorneys,
  • rents,
  • services (including parts and materials), and
  • other types of payments not covered by another information reporting document.

$10 or more per year is paid for

  • broker payments in lieu of dividends or tax-exempt interest, and
  • royalties

Reporting such payments is required if the recipient of the payment is not a corporation -- for example, when the recipient is an individual, partnership, a limited liability company treated as a partnership or sole proprietorship. Payments made to corporations are required in the case of medical and health care payments and in the case of legal fees paid to attorneys. Other types of payments made to corporations may be reported using Form 1099-MISC, but is not required.

Steps to Take to Prepare for 1099-MISC Forms

You should request that your vendors, contractors and other payment recipients submit to you a Form W-9.

The W-9 will provide you with the legal name, address and taxpayer identification number for the vendor, which is the information you will need when preparing any 1099-MISC forms.

You should also keep track of your payments in your bookkeeping system. You will need to know whether the payment falls under any of the categories listed above for reportable payments, whether your payments to a particular recipient reaches the $10 or $600 threshold for reporting, and finally you'll need to know the exact amount you paid the recipient for the year.

Penalties for Filing Form 1099-MISC Late

  • $30 penalty for filing a 1099 not more than 30 days late;
  • $60 penalty for filing a 1099 more than 30 days late and before August 1;
  • $100 penalty for filing a 1099 on or after August 1;
  • $250 penalty for intentional failure to file.

Deadlines for 1099-MISC Forms

  • Provide the recipient with his or her copy of the Form 1099-MISC by February 1, 2016, reporting income payments for the year 2015.
  • Mail the Form 1099-MISC to the IRS by February 29, 2016.
  • Or electronically file Form 1099-MISC with the IRS by March 31, 2016.

Businesses can request a 30-day extension to file 1099s with the IRS using Form 8809. An extension does not permit additional time for furnishing the 1099 to the recipient.

New Deadlines Take Effect in 2017

Forms 1099-MISC must be filed with the IRS by January 31, 2017, for calendar year 2016 forms. This is the same due date for furnishing these statements to payees. Businesses no longer will be eligible for the extended filing due date (February 28th for paper filers and March 31st for electronic filers).

This earlier deadline was mandated as part of the Protecting Americans from Tax Hikes Act of 2015. It takes effect for information returns relating to calendar year 2016 and future years.

Reference Material Relating to Form 1099-MISC

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