It’s time for businesses to send out their annual information returns. These are the Form 1099s that are sent to to vendors when required. Let’s look first at who does not have to receive 1099s:
- Corporations (except attorneys)
- Entities you purchased tangible goods from
- Entities you purchased less than $600 from (except royalties; the limit there is $10)
- Where you would normally have to send a 1099 but you made payment by a credit or debit card
Otherwise, you need to send a Form 1099-MISC to the vendor. The best way to check whether or not you need to send a 1099 to a vendor is to know this before you pay a vendor’s invoice. I tell my clients that they should have each vendor complete a Form W-9 before they pay the vendor. You can then enter the vendor’s taxpayer identification number into your accounting software (along with whether or not the vendor is exempt from 1099 reporting) on an ongoing basis.
Remember that besides the 1099 sent to the vendor, a copy goes to the IRS. If you file by paper, you likely do not have to file with your state tax agency (that’s definitely the case in California). However, if you file 1099s electronically with the IRS you most likely will also need to file them electronically with your state tax agency (again, that’s definitely the case in California). It’s a case where paper filing might be easier than electronic filing.
If you wish to file paper 1099s, you must order the forms from the IRS. The forms cannot be downloaded off the Internet. Make sure you also order Form 1096 from the IRS. This is a cover page used when submitting information returns (such as 1099s) to the IRS.
Note also that sole proprietors fall under the same rules for sending out 1099s. Let’s say you’re a professional gambler, and you have a poker coach that you paid $650 to last year. You must send him or her a Form 1099-MISC. Poker players who “swap” shares or have backers also fall under the 1099 filing requirement.
Finally, there are strict deadlines with information returns. Here are the deadlines for 2014 information returns:
- Monday, February 1st: Deadline for mailing most 1099s to recipients;
- Monday, February 29th: Deadline for filing paper 1099s with the IRS (postmark deadline); and
- Thursday, March 31st: Deadline for filing 1099s electronically with the IRS.
Remember, if you are going to mail 1099s to the IRS send them certified mail, return receipt requested so that you have proof of the filing.
Tags: 1099s
I have a question. We file as a 2 member LLC taxed as S-Corp. We need to issue 1099-MISCs from both members to the LLC for the total amount of W-2Gs we each received in 2015. How/where would I reflect this on each of our personal returns? Should both members just include an explanation and file their personal returns by mail?
What you propose is one method; you can also include an explanation if you file electronically (most software has that ability). Talk with your tax professional about what you should do for your specific situation.