1099 Reporting Requirements for Tax Year 2017

Form 1099 Filings

Dear Client:

The IRS has become stricter with 1099 information reporting and filings by assessing harsher penalties. The penalties associated with missing the deadline or not filing 1099s can range from $30 to $100 per form, with a maximum fine of $500,000 per year. If the IRS determines there is intentional disregard of the requirements, the penalty can reach as high as $250 per form, with no maximum.

For the 2017 calendar year, Form 1099-MISC are due to be provided to recipients by January 31, 2018. Form 1099-MISC must also be filed with the IRS (and states, if applicable) by January 31, 2018.

Other 1099 series forms are generally due to the Recipient by January 31, 2018 and to the IRS by February 28, 2018 if paper filing, and by April 2, 2018 if electronic filing.

If you are submitting 250 or more 1099 forms, you must file electronically.

IRS Form 1099-MISC summarizes payments made to unincorporated businesses and individuals and to all lawyers and law firms regardless of type of entity. You must send out a Form 1099-MISC if your business paid $600 or more during the year to such businesses or individuals; this includes any partnerships or Limited Liability Companies you may have contracted throughout the year. If you have not obtained a Form W-9 from your vendors indicating the type of entity they are, you should assume if the name of the business does not include “Inc., Incorporated or Corporation” in its name, it is an unincorporated business, and a Form 1099-Misc would be required.

Note: Form 1099 is not required to be issued for Corporations (“Inc. or Corp”). However, as stated above, a Form 1099 must be issued to all lawyers and law firms you have hired, regardless if they are incorporated.

You must report payments on Form 1099-MISC only when the payments are made in the course of your trade or business; personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. For this purpose, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements.

Federal Form 1099-MISC must be issued under the following conditions:

  • If you paid at least $600 in:
    • Rents;
    • Services performed by someone who is not your employee;
    • Attorney and legal fees;
    • Prizes and awards;
    • Other income including punitive damages and deceased employee’s wages;
    • Cash payments for fish you purchase from anyone engaged in the trade of catching fish;
    • Fishing boat proceeds;
    • Crop insurance proceeds.
  • You paid at least $10 in royalties, broker payments in lieu of dividends or tax exempt interest;
  • Direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment;
  • Director’s fees and other remuneration, including payments made after retirement;
  • You withheld any federal income tax under the backup withholding rules regardless of the amount.

Please inform us immediately if you would like to engage us to prepare Form 1099’s for your business. In order to ensure a timely filing of Form 1099, we will need complete information as soon as possible. If you haven’t done so yet, please obtain a completed Form W-9 (Request for Taxpayer Identification Number) from each independent contractor who received payments of $600 or more during the current year.

Additional information that is needed to prepare Form 1099-MISC is the dollar amount paid in 2017 and the state in which the service was performed. Typically, this is the home state of the payer; however, if services were received in various states, please specify the state for tax filing purposes.

Unless you specifically engage us to prepare your 1099s, you are responsible for preparing and filing Forms 1099. If you are audited, the IRS will want documentation of expenses and will look at whether 1099s were filed. Any wage and labor amounts to be deducted on your return will be separately classified and will not be hidden or bundled with other expenses, since there are specific lines on the returns for wages and labor.

There are many other types of information returns that you may be required to file depending on the types of activities in which your business engages in. Some of the more utilized 1099 Forms are for interest or dividends paid. Please contact us at your earliest convenience with any questions.

If you have any questions, please feel free to contact our office.