1099 Rules for Business Owners in January 2018
Did you know there have been a number of changes and updates regarding the reporting rules for the 1099-Misc Form? Often times business owners guess what the rules are or simply choose not to file anything at all. Don’t make this mistake as penalties can add up fast.
So what are the rules? Generally speaking, business owners must issue a Form 1099-MISC to each person to whom you have paid at least $600 in rents, services (including parts and materials), prizes and awards, or other income payments. You would not need to issue 1099s for payment made for personal purposes.
Penalties can range from $30 to $100 per form ($1.5 million for the year), depending on how long past the deadline the company issues the form. If a business purposefully disregards the requirement to provide a correct contractor with a statement, it is subject to a minimum penalty of $250 per statement, with no maximum. This can be a costly mistake.
• Who are you required to send a Form 1099? You are required to send Form 1099 to vendors or sub-contractors during the normal course of business you paid more than $600, and that includes any individual, partnership, Limited Liability Company (LLC), Limited Partnership (LP), or Estate.
• Who would be considered a Vendor or Sub-Contractor? Any person or company you have paid for services that isn’t your employee.
• Are there any exceptions?
- Vendors operating as S or C-Corporations (status is located on W-9)
- Sellers of merchandise, freight, storage or similar items
- Rent payments to or through real estate agents (typically property managers)
• What about credit cards or Paypal?
IRS excludes any payment you made by credit card, from Form 1099-MISC any payments you made by credit card, debit card, gift card, or third-party payment network such as PayPal. (These will be reported on Form 1099-K.)
• What about lawyer’s fees? The government doesn’t trust that lawyers will report all of their income. If your lawyer is incorporated and you paid him/her over $600, based on the requirements you should send them a Form 1099.
As a business owner, request a W-9 from any vendor you expect to pay more than $600 before you pay them. By making this your business practice, you will know the vendor’s mailing information, Tax ID number, and if they are a corporation or not. New Year’s Resolution for 2018, make sure to get a Form W-9 from all your vendors before they can get paid.
Filling a 1099, is not easy. You CANNOT simply go to www.irs.gov and download the 1099 Forms and send them out to your vendors before the deadline. This pre-printed form is in triplicate requiring you to order the Forms from the IRS, pick them up at an IRS service center, or pick some up at the closest office supply chain.
Taxpayers are required to issue and mail out all Form 1099s to vendors and the IRS by January 31st, not February. Then, you have to compile all of your 1099s and submit them to the IRS with a 1096 by January 31st. Boy does this sound like fun? Reach out to Robert Palmer and Associates for assistance with filing your 1099-Misc Form. Our office can provide this service affordably and efficiently so you can stay focused on your New Year’s Resolutions and your updated Marketing Plan making money rather than filling out paperwork. If you need support or have questions, please contact Maggie Peeler in our office for this service at 803.547.7024 or email her directly at firstname.lastname@example.org.