Form 1099-MISC has to be filed when payments are made in the course of a trade or business. Personal payments do not have to be reported on a Form 1099-MISC. The IRS requires businesses to issue Form 1099-MISC to the payee and submit a copy to the IRS. This is done to ensure that the payee reports and pays income tax on the payment.
FILING DEADLINE FOR FORM 1099-MISC
The IRS copy of the form must be filed with the IRS by January 31 if you are reporting payments in box 7 (non-employee compensation). This is the second year the Form 1099 deadline is January 31. The prior due date was February 28 (and March 31 if filing electronically). The form filing deadline for payments outside of box 7 (e.g., rent or royalty) have not changed (i.e., due February 28 or, if filed electronically, March 31). The payee copy, regardless of the type of payment, is still due on January 31.
Penalties for Late Filing/Non-Filing
If the Form 1099 is filed within 30 days after the deadline, the penalty is $50 per 1099. If the Form 1099 is filed between 30 days after the deadline and by August 1, the penalty is $100 per 1099. If the Form 1099 is filed after August 1 (or not filed at all), the penalty is $260 per 1099. If there is intentional disregard of the filing requirement, the penalty is $530 per 1099.
The above penalties apply if the form is not filed with either the IRS or the payee. If the Form 1099 is not filed with either the IRS or the payee, the above penalty is essentially doubled.
What Type of Payments Have to Be Reported on Form 1099-MISC?
Payments that require the filing of a Form 1099-MISC include:
- $10 or more in royalty payments
- At least $600 in:
- Services provided to you by someone who is not your employee (e.g., independent contractor)
- Prizes and awards
- Other income payments
- Crop insurance proceeds
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
- Cash paid from a notional principal contract to an individual, partnership, or estate
- Payments to an attorney
- Any fishing boat proceeds
In addition, Form 1099-MISC is used to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
What Payments Do NOT Have to Be Reported on Form 1099-MISC?
Certain payments do not have to be reported on Form 1099-MISC, although they may still be taxable to the payee. Common payments that do not have to be reported on a Form 1099-MISC include:
- Payments to a corporation (see exceptions below)
- Payments to an LLC that elects to be treated as a corporation (again, see exceptions below)
- Payments for merchandise
- Wages paid to employees
- Payments of rent to real estate agents (but the real estate agent must use Form 1099-MISC to report the rent paid over to the property owner)
- Payments made by credit cards (the credit card company will issue a 1099-K to the recipient)
When Payments to Corporations Must Be Reported on Form 1099-MISC
Form 1099-MISC is required for payments to corporations for:
- Medical and health care payments
- Fish purchases
- Attorney fees
- Gross payments to attorneys (generally by insurance companies)
- Substitute payments in lieu of dividends
When Backup Withholding is Required
You must withhold 28% of the payment you make to certain recipients. This withholding is referred to as backup withholding and is paid to the IRS. Backup withholding is required when:
- The payee fails to furnish a SSN or TIN (it is recommended to get the payee’s SSN or TIN prior to the payee performing any services for you)
- IRS notifies payer to impose backup withholding
To see how this applies to you, give us a call at 248-538-5331.
Buzzkill Disclaimer: This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.