Snyder and Associates

 

Tax Byte

Don't Forget Your 1099 Reporting Requirement

While the IRS’ previous attempts to expand required 1099-MISC reporting were repealed in 2011, business owners still face penalties if they do not report qualified transactions to the government. There can also be penalties assessed if they are filed, but not correctly.  Here are a few rules to remember when preparing 1099-MISC forms.

 

WHAT: Payments to any individual you paid more than $600 during the year (for the year) for services (including parts & materials) and rents are considered qualified transactions. Payments to attorneys, whether they are incorporated or not, of more than $600/year are also considered qualified transactions.  You are required to send a copy of each vendor’s 1099 form to the government as well as to the individual.  A complete list of qualifying transactions can be found on the IRS website at http://www.irs.gov/pub/irs-pdf/i1099msc_13.pdf.

 

WHO: Reporting is required to recipients who are unincorporated and to any attorneys.  This includes sole proprietors, partnerships, and limited liability companies (LLC’s) that have not elected to be taxed as a corporation.  It is best to ask the person you are paying to complete IRS Form W-9.  This form includes the information you need to accurately complete a 1099, and gives you documentation if the IRS audits your records.  You should get this form completed BEFORE you issue the first check.

 

WHEN: 1099’s are issued on a cash basis.  That means you issue the 1099 in the year in which the payment was made, not the year in which the expenses were incurred.  For example, if you used an attorney’s services in 2013, but did not pay them until 2014, you will issue them a 2014 1099 for those services. 

The filing deadline to give your vendors their copy of the 1099-MISC forms is January 31 each year.  The IRS’s copy (the red forms) are due by February 28, but this filing date can be extended until March 30 by using Form 8809.  Beware that an extension of time granted by the IRS does not give you additional time to provide 1099s to recipients.  You could be penalized if you don’t give them their copy by January 31st.

 

Being pro-active about issuing 1099s is a good strategy in defending your deductions.  The IRS can disallow deductions when a proper 1099 has not been issued.

 

If you have any questions or need any additional information please give us a call.



Stephanie Brown,

Account Manager/AVA

 

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