Form 1099 Requirements

Please ensure you are following the rules in regards to the issuance of 1099’s. Congress changed these rules in 2011; then later reversed some of those changes. This has led to a great deal of confusion as to the current 1099 rules.

Basically, if in the course of business you pay an individual or an “organization” $600 or more for rent, royalties or services, you need to send the recipients of those funds a 1099. An “organization” includes sole proprietors, partnerships, LLC’s, etc… You do not need to file a 1099 for payments to an incorporated business.

Per the new laws those owning rental properties, farmers, and sole proprietors are now considered a business and need to issue 1099′s.

There is an exception to the not having to file a 1099 to incorporated businesses rule. You are still required to file a 1099 for attorney fees regardless of whether or not that business is incorporated. The threshold for this is $600 or more.

The IRS has placed a new question on business tax filings (including rental and farm filings as well as sole proprietor filings) in which you verify to the IRS that all required 1099 forms have been filed. If they have not been filed when they should have been, “red flags” could go up which could have audit implications.

I think a good rule of thumb, is that if in doubt, and you paid someone $600 or more for services, write the 1099.

The 1099′s mailed to the recipients must be post-dated on or before January 31st, 2012. The due date for the 1099’s (And transmittal Form 1096) to the government is February 28th, 2012. The penalties for not filing are pretty severe:

$30 per 1099 if filed within 30 days of the due date
$60 per 1099 if filed after 30 days but before August 1^st
$100 per 1099 if filed after August 1^st
$250 per 1099 for intentional disregard of the rules.

We advise you to have a properly filled out W-9 form from your vendors prior to hiring the vendors to do work for your business. This will ensure that you have the necessary
information when it comes time to prepare the 1099’s. We’ve had experience when the opposite is true and the vendor refuses to provide the 1099 information.

We would be happy to prepare the necessary 1099′s for your business! Please give us a call at 260-338-0833!

Brent Bracht, CPA