As the year winds down, business owners may be asking themselves, “do I have to issue any 1099-MISC forms?” Ok, so maybe not those words exactly, but mindfulness of specific tax filings is always a good thing. The IRS requires that businesses file informational returns for certain types of payment. For today, we are looking at those that require the 1099-MISC form.
Put simply, the 1099-MISC form is used for payers (e.g. businesses) that pay certain types of income to certain people, such as independent contractors, attorneys, or prize recipients. The 1099-MISC is used for:
– A payer that pays at least $600 in a year for:
- Nonemployee compensation, rents, etc. (e.g. volunteer’s meals and hotel costs).
- Services performed by someone who is not your employee (such as an independent contractor for IT work for your office).
- Cash payments for fish (or other aquatic life) purchased from anyone in the business of catching fish.
- Prizes and awards (such as prize payouts) to nonemployees.
- Medical and health care payments (e.g. proceeds from medical insurance to nonemployees).
- Crop insurance proceeds.
- Payments from a notional principal contract (NPC) to an individual, partnership, or estate.
- Payments to an attorney.
- Fishing boat proceeds.
- Other income payments (such as taxable fringe benefits for non-employees)
– Direct sales of $5000 of consumer products to buyers (e.g. someone selling Amway products to consumers).
– Substitute payments in place of dividends or interest of at least $10.
– Other specialized payments such as excess “golden parachute payments”, combined federal/state filing programs, and federal backup withholdings.
Forgetting the 1099-MISC Can Cost You
Payees need the 1099-MISC to accurately report their income taxes, therefore payers such as businesses have an urgency to file those forms. For payers, the penalty for not filing 1099-MISC forms for 2018 is $50 for each return within 30 days. The penalty increases to $100 per return and even increases further after the 1st of August to $260 per return.
The numerous items involved in properly filing 1099-MISC requires accurate and thorough accounting. Having a team like us at MiklosCPA can assist in those needs. Feel free to reach out to us if you would like to learn more about us and our services. We are a California CPA firm that helps many small to mid-sized businesses with their tax and accounting needs. Check us out on our social media pages for future articles and other “good to know” information.