December 13, 2019

Understanding the Requirements for Form 1099-MISC

By Jason Moon, Manager, Accounting Services

Understanding the Requirements for Form 1099-MISC

As a business owner, you are certainly familiar with IRS Form 1099-MISC, but how much do you really understand about 1099 requirements and the data that needs to be collected? While they may seem straightforward on the surface, there are many gray areas that must be understood if you want to avoid substantial IRS penalties.

Who Receives the Form?

The 1099-MISC is typically filed by a business to other businesses and sole-proprietors, such as a contractor, who provided a service during the tax year. As a rule of thumb, form 1099-MISC must be issued to including but not limited to:

Any non-corporation paid $600 or more for:

  • Rent
  • Services
  • Prizes and awards
  • Other Income payments
  • Medical and health care payments
  • Payments to attorneys (with some exceptions)

While you don’t typically have to issue the form for payments to corporations – including LLCs treated as an S corporation or C corporation – there are some exceptions, including the following:

  • Medical and health care payments
  • Attorneys’ fees
  • Gross proceeds payable to an attorney
  • Fish purchases for cash (odd, but true!)

The IRS provides a comprehensive list of who should and should not receive Form 1099-MISC.

Capturing the Information You Need

Now that you know who must receive a 1099, how do you make sure you have the information you need? The first step is to request a form W-9 from any and all vendors before providing payment to them. A properly completed form W-9 will provide much of the required information you need, and it will help you make the determination if a 1099-MISC should be filed. If so, the W-9 will help to ensure the 1099-MISC form is completed correctly.

Filing the 1099-MISC

Copy B of the 1099-MISC should be submitted to all recipients no later than January 31, 2020, although there are some exceptions. Also, be aware that states may have an equivalent requirement, and you will need to understand how to comply.

The IRS allows the 1099-MISC to be paper-filed but only on scannable forms obtained from office supply stores or other providers. However, if you have 250 or more 1099-MISC forms, the IRS requires electronic filing.

Form 1099-MISC can be complicated, and it’s important to understand each business’ situation. A tax professional can assess your business relationships and determine who should and should not receive the form.

Do you have questions about 1099s, or other outsourced accounting solutions issues? Please contact Jason Moon, CPA, at 440.459.5878 or [email protected].