The year is quickly passing by, so it is a good time to start preparing for end of the year tasks, such as identifying those payments requiring Form 1099 reporting and obtaining the required Form W-9 for your vendor records.
To name only a few, the IRS requires that a Form 1099-MISC be issued for payments of at least $600 in rents, services (including parts and labor), prizes and awards, other income and medical and health care payments, if these payments are made in the course of your trade or business.
Some payments are exempt from Form 1099 reporting. Examples are:
- payments to corporations, unless the payments are to attorneys for legal services
- payments of rent to real estate agents
- payments for merchandise, telegrams, telephone, freight, storage and similar items
- payments to employees for business expense reimbursements
To aid in determining whether or not a Form 1099 should be issued, a signed Form W-9 (Request for Taxpayer Identification Number and Certification) should be obtained from vendors before payments are made. Form W-9 will include the necessary taxpayer information needed to assist in preparing required Forms 1099, as well as help you comply with back up withholding requirements, if any, from vendor payments. You can access Form W-9 at http://www.irs.gov/pub/irs-pdf/fw9.pdf.
Penalties for failure to file Form 1099 can range from $30 to $100 per return. Intentional disregard of the filing requirements can result in penalties of a minimum of $250 per return with no maximum.
The above information is by no means the complete set of rules regarding Form 1099-MISC filing requirements. IRS Instructions for Form 1099-MISC are located at http://www.irs.gov/pub/irs-pdf/i1099msc.pdf. For additional information or assistance with compliance with these filing requirements, please contact one of the people listed below.
Sarah Cooke 501.978.8347
Ashley Eaton 501.978.8348
Michelle Price 501.978.8318
Karla Davidson 501.978.8345