Is your business in compliance with I.R.S. Form 1099-MISC requirements?

Is your business in compliance with I.R.S. Form 1099-MISC requirements?

Is your business in compliance with I.R.S. Form 1099-MISC requirements?

Kuulbox Dev – Wednesday, January 04, 2012

Forms 1099 for 2011 payments must be mailed to recipients by January 31, 2012 and electronically filed with the Internal Revenue Service by April 2, 2012.  There are many online services available for fulfilling this Federal compliance requirement.  Some of them are listed below as follows:

Businesses are required to file Form 1099-MISC, Miscellaneous Income, for each person to whom it has paid during the year:

  • At least $10 in royalties (see Box 2 on page 4) or broker payments in lieu of dividends or tax-exempt interest (see Box 8 on page 7);

  • 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. 

Trade or business reporting only.   Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, 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.

Exceptions.   Some payments are not required to be reported on Form 1099-MISC, although they may be taxable to the recipient. Payments for which a Form 1099-MISC is not required include:

  • Generally, payments to a corporation;

  • Payments for merchandise, telegrams, telephone, freight, storage, and similar items;

  • Payments of rent to real estate agents, but see Regulations section 1.6041-1(e)(5);

  • Wages paid to employees (report 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 (report on Form W-2);

  • Business travel allowances paid to employees (may be reportable on Form W-2);

  • Cost of current life insurance protection (report on Form W-2 or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.);

  • 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; and

  • Certain payment card transactions if a payment card organization has assigned a merchant/payee a Merchant Category Code (MCC) indicating that reporting is not required. A cardholder/payor may rely on the MCC assigned to a merchant/payee to determine if a payment card transaction with that merchant/payee is subject to reporting under section 6041 or section 6041A. For more information and a list of merchant types with corresponding MCCs, see Revenue Procedure 2004-43 available at

Please note that Forms 1099 are generally not required for miscellaneous payments totaling less than $600.  However, the law now requires 1099’s for payments made to corporations for legal and medical services totaling $600 or more.  Please also note that if you do not provide correct payee statements to the government and cannot show reasonable cause, the IRS may assess a penalty of $50 per statement, with a maximum of $100,000 per year.

Our office is available to
answer any questions you have related to your Form 1099 compliance
requirements.  Please call or email Sousa & Weber today!

By |2014-07-10T17:43:35+00:00January 4th, 2012|Tax and Auditing, Tax Compliance|0 Comments

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