Form 1099-MISC is used to report certain types of payments made in the course of a trade or business. If you’re in business or self-employed, you may need to submit this report to both the Internal Revenue Service and the unincorporated person or business owner that you paid.
Businesses will need to fill out a Form 1099-MISC for unincorporated persons, vendors, subcontractors, independent contractors, and others in the following circumstances that were paid $600 or more in the year for:
• cash payments to fishermen
• crop insurance proceeds,
• medical and health care payments,
• prizes and awards,
• proceeds paid to attorneys,
• services (including parts and materials), and
• other types of payments not covered by another information reporting document.
Reporting such payments is required if the recipient of the payment is not a corporation — for example, when the recipient is an individual, partnership, a limited liability company treated as a partnership or sole proprietorship.
You should request that your vendors, contractors and other payment recipients submit to you a Form W-9. This W-9 form will provide you with the legal name, address and taxpayer identification number for the vendor, which is the information you will need when preparing any 1099-MISC forms.
You should also keep track of your payments in your bookkeeping/accounting system. You will need to know whether the payment falls under any of the categories listed above for reportable payments, whether your payments to a particular recipient reaches the $600 threshold for reporting, and finally you’ll need to know the exact amount you paid the recipient for the year.
The following penalties will be in effect for the year 2014:
• $30 penalty for filing a 1099 not more than 30 days late;
• $60 penalty for filing a 1099 more than 30 days late and before August 1;
• $100 penalty for filing a 1099 on or after August 1;
• $250 penalty for intentional failure to file.
The penalties in effect for 2015 will be higher than the 2014 amounts. The Tax Increase Prevention Act of 2014 (signed into law on 12/19/14) requires that the late penalties be indexed for inflation, beginning with any information returns that are required to be filed after December 31, 2014. The IRS has not yet released the inflation-adjusted penalty amounts for the 2015 penalties.
The deadlines for filing Form 1099-MISC are:
• Provide the recipient with his or her copy of the Form 1099-MISC by February 2, 2015, reporting income payments for the year 2014.
• Mail the Form 1099-MISC to the IRS by March 2, 2015.
• Or electronically file Form 1099-MISC with the IRS by March 31, 2015.
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