With January 31 quickly approaching, it is time to start gathering information to prepare your annual Forms 1099.
Common Form and Filing Requirements
Although there are many types of Forms 1099 that may be required to be issued, this article will focus on the most commonly prepared.
Form 1099-DIV Dividend Income and 1099-INT Interest Income is required for each person whom you have paid the following:
- Gross dividend or interest of $10.00 or more.
- Any foreign tax withheld.
- Any federal income tax withheld under the back-up withholding rules.
- Payments of $600 or more as part of a corporate liquidation.
Form 1099-MISC Miscellaneous Income is required for payments made in the course of a trade business for any of the following:
- At least $600 paid for services (including parts and materials). Please note the IRS has been aggressive in its attempts to reclassify independent contractors as employees.
- At least $600 paid for rents, prizes, awards, other income payments, and medical and health care payments.
- At least $600 paid for medical and health care payments even if paid to a corporation.
- At least $600 paid to attorneys (regardless of type of entity) for legal services should be reported in Box 7.
- Amounts paid to an attorney of $600 or more, which are for other than services, such as a settlement should be reported in Box 14.
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
- Any fishing boat proceeds.
- Direct sales of at least $5,000 of consumer products to a buyer for resale.
- Any federal income tax withheld under the back-up withholding rules regardless of the amount of the payment.
Effective with the 2016 filing year, the IRS changed the filing deadlines. Forms 1099-MISC are due by January 31, 2018 to the Internal Revenue Service (IRS) when reporting non-employee compensation payments in Box 7. Otherwise, the due date to the IRS is February 28, 2018. The deadline of January 31, 2018 for providing Forms 1099 to recipients remains unchanged.
Electronic filing is required when you are filing 250 or more information returns. Information returns include but are not limited to: 1098, 1099, W-2, 1095 and 1094. The 250 or more requirement applies separately to each type of form.
What is Needed to Prepare Forms 1099?
The following information is needed to complete the Forms 1099:
- Recipient’s name, address and either the recipients Social Security Number (SSN) or Employer Identification Number (EIN). To aid in gathering this information, an IRS Form W-9 Request for Taxpayer Identification Number and Certification can be sent to the vendor/subcontractor formally requesting this information.
- Amount and type of compensation – the amount that should be reported should be the actual cash paid by the company and should not include payments made via credit card. The payments made via credit card are reported to the recipients by the credit card company on IRS Form 1099-K.
Penalties
Form 1099 reporting is not a matter to be taken lightly. The IRS has increased its efforts to determine that responsible parties file the proper returns. As with any IRS form, failure to timely file an accurate information return or provide related statements to payees can result in penalties.
The penalty rates and maximum penalty that can be assessed for failure to file correct information returns and/or to furnish correct payee statements for 2017 are as follows:
| Businesses with gross receipts $5 million or more | Businesses with gross receipts $5 million or less | |
| Not more than 30 days late | $50 per return/
$536,000 maximum |
$50 per return/
$187,500 maximum |
| 31 days late to August 1 | $100 per return/
$1,609,000 maximum |
$100 per return/
$536,000 maximum |
| After August 1 or not at all | $260 per return/
$3,218,500 maximum |
$260 per return/
$1,072,500 maximum |
| Intentional disregard | $530 per return/
No maximum |
$530 per return/
No maximum |
The IRS has been performing a matching program whereby the Form 1099 submitted is compared to the payee’s Social Security card or the entity’s EIN. If your payee has given you a SSN as his/her taxpayer identification number, it is important to report the person’s full name as shown on the person’s Social Security card rather than the trade name of the business.
In recent years, the IRS has added two questions to all income tax returns regarding 1099 filing requirements. The questions ask if any payments were made that would require a Form 1099 to be filed, and whether the forms were actually prepared and filed. Non-filing could also affect your ability to take a deduction on your income tax return.
If you have questions about your 1099 filing requirements, contact your CSH tax advisor.
