Who Gets a 1099?
When business owners ask this they are usually referring to the 1099-MISC.
The extremely short, general guideline is - All non-employees (vendors) to whom you pay more than $600 for services provided to your business in a calendar year. These persons do not need to have a formal business (where they file business taxes), it can be:
· Sole Proprietor / Individual
· LLC who has not taken S-Corp election
· PC (Professional Corporation, different form C-Corp and S-Corp)
Here are a few more details.
There are other payments that need to be reported, such as, but not limited to:
· Services performed by non-employees – including parts and materials
· Prizes and awards to non-employees, royalties
· Medical and Health Care payments
· Cash payments from your business to persons who are in the fish catching trade or business
· Fishing boat proceeds
· Payments to an attorney - there are different kinds, reportable in different boxes of the 1099 form - Legal fees and Gross proceeds.
Of course, there are many particulars and some exceptions to this general guideline:
· Corporations do not need to receive a 1099-MISC. This includes C-Corps, S-Corps and LLCs reporting as S-Corps. This exemption does not apply to payments for legal services; if you’ve paid an attorney more than $600, send them a 1099 no matter their entity type.
· Rent payments to rental agents
· Payments to entities regarded as tax-exempt organizations
· Payments for storage, freight, merchandise and the like
· If you paid your Vendor through a credit card or PayPal, a 1099k will be issued by that merchant; relieving you of the need to send.
And, there are exceptions to the exceptions of the general guideline. Here are the latest 1099 instructions from the IRS for all the details.
· When you hire a new Vendor, collect a W9 from them prior to issuing their first payment. By doing so, you’ll have all the details from them you’ll need to issue a 1099, if they are eligible, making year-end much easier.
· Use your accounting software to map eligible reporting categories so all you need to do at year-end is run a report to identify eligible Vendors and payments.
When in doubt about whether or not a Vendor or payments to a Vendor need to be reported, contact a learned bookkeeper, accountant, EA or CPA. If you do not yet have a trusted advisor on such matters, let us know your questions and we’d be happy to provide a list of resource providers best suited to answer your needs.