Who Gets a Form 1099 and When are They Due?
December 13, 2016
As the year draws to an end, many business owners face the challenge of determining which of their vendors will require a 1099. Failure to comply with this requirement may result in fines based on a per filing basis. However, with some basic planning this annual process is not as daunting as you may think.
When are they due?
New this year, Form 1099-MISC will be due to the IRS by January 31 if reporting non-employee compensation payments in box 7. Otherwise, for all other boxes on the 1099-MISC, 1099-DIV and 1099-INT the next filing dates are February 28 if filing by paper, or March 31 if filing electronically.
What type of payments qualify for a 1099?
In general, payments for personal services of at least $600 require 1099-MISC. Common examples include:
- YES – Services, retainers, honorariums and similar
- YES – Attorney fees of any kind
- YES – Rent, unless paid to a real estate firm
- YES – Board of Director fees
- NO – Employee expense reimbursements
- NO – Goods, supplies and merchandise
- NO – Telephone charges
- NO – Insurance payments
- NO – Freight charges
- NO – Anything paid for with a credit card
Who gets a 1099?
After meeting the minimum requirements for a 1099, you need to refer to box 3 on form W-9. In this box, you will find the criteria which determine what tax entity gets a 1099. You may download Form W-9 from the IRS site.
Federal tax classification:
- YES- for LLC’s who selected “P” on the W-9
- YES- for partnerships
- YES- for all attorneys
- YES- for individuals or sole proprietors (helpful tip: if their tax ID number is in the form of a social security number, then this is definitely a YES)
- NO- for nonprofits
- NO- for corporations
- NO- for LLC’s who select “C” or “S”
Best practice tip:
It is a good business practice to request W-9 forms from your vendors throughout the year prior to making your first payment. As a result, this will save you time and headaches as you begin to determine which vendor will require a 1099.
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