1099-MISC Filing Requirements for Small Businesses

There a several different types of 1099s that exist in the federal 1099 information reporting series. However, one of the most popular forms that small businesses need to file is the Form 1099-MISC.

What is a Form 1099-MISC?

Form 1099-MISC is essentially an information report that is required to be sent to certain recipients who have been paid during the year in the course of a trade or business. A copy of the Form 1099-MISC is also reported to the Internal Revenue Service (and some states) for their records as well. Failure to file a required 1099 may result in denied expense deductions upon audit and additional penalties and fees (typically $30 to $100 per missed filing for federal purposes).

Form 1099-MISC Filing Requirements

Form 1099-MISC is required to be filed in several instances. However, some of the most common examples are as follows:

  • Nonemployee Compensation/Independent Contractors – required when $600 or more is paid during the year to a nonemployee. Includes payment for professional services (fees to attorneys, accountants, engineers, repairman, etc.).
  • Rents – all types when the amount paid is $600 or more (unless made to a real estate agent). Examples include real estate rentals for office space, machine rentals, etc.
  • Royalties- amounts that exceed $10. Examples include payments to authors, musicians, artists, etc.
  • Direct Resellers – required when sales are made in the amount of $5,000 or more of consumer products anywhere other than to a permanent retail establishment.

1099-MISC Filing Exemptions

There are a few cases when Form 1099-MISC does not need to be filed even though it may have met the aforementioned requirements.  A few examples are as follows:

  • Note that 1099-MISC generally do not need to be issued to corporations.
  • Amount paid via credit card, debit card, or third-party settlement company (i.e., PayPal) should not be reported on a 1099-MISC as they will be now be reported on Form 1099-K by the bank or third-party.

Tax Reporting of 1099-MISC

There is now a question on tax returns which specifically ask if a business was required to issue 1099s and if so, whether they were filed.  Therefore, the IRS has implemented extra measures to make sure the 1099s are filed and will likely begin strictly enforcing the rules.  It is advised to collect a Form W-9 from all vendors so that 1099s can be issued if needed.

Form 1099-MISC Due Date

Form 1099-MISC is due each year to the recipient by January 31 and to the IRS by the last day of February. However, if filing your 1099-MISC electronically the date is extended to March 31st. Each state also varies with its deadlines and requirements. For example, North Carolina 1099-MISC reflecting NC income tax withheld must be submitted by the last day of January.

This information is intended to provide general guidance only. It is advised that you contact a trusted tax advisor to discuss how this information may apply to your business activity. Please feel free to contact Simply Taxes, LLC should you need further guidance.

Simply Taxes, LLC is a local year-round tax preparation firm with an office located in North Raleigh. Our Raleigh accountants are ready to assist you with your questions pertaining to this tax topic and others.

Sources/References:

IRS Website – Online Order Form

IRS Website – Instructions for Form 1099-MISC

IRS Website – Form W-9

IRS Website – General Instructions for Certain Information Returns

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