1099 rules that can make/break this year

We have seen serious of changes or updates related to 1099 MISC Forms, over the years. These frequent changes in the 1099 rules have brought some confusion among the business owners, which led to incorrect filing, resulting in heavy IRS penalties. Hence, before filing the 1099 MISC form electronically, it becomes necessary to know the basic rules first. Read on the rest, to know more.

Whom to send Form 1099 MISC?

A business owner is liable to send the Form 1099 to the sub-contractors or vendors, to whom he/ she paid more than $600 during the business period. This includes partnership, individual, Limited Partnership (LP), Limited Liability Company (LLC) or estate.

So, who are these sub-contractors or vendors?

These sub-contractors or vendors are not your regular employees; instead, they are paid for their offered services.

Is there any exceptions?

Yes, the most common exceptions to whom you no need to send the Form 1099 are as follows :

Vendors who are operating as S or C corporations.(The status can be found in the W9 form)

LLC or partnership (ONLY when they are taxed as S or C Corporations)

Storage, freight, merchandise sellers.

Rent payments. Issuing a 1099 is necessary to the landlord.

Exceptions for third party payment and Credit Card Payment:

The taxpayers are excluded from 1099 MISC Form by the IRS, when the payments are done through any third party payment network like PayPal, gift card, debit or credit card.

How to get the information to issue Form 1099?

If you are confused with the insufficient data to issue the 1099 MISC form, you can seek the assistance of W9 form. Before paying the vendor more than $600, you can request W9 form from the vendor. You can get the needed information from the W9 form like Tax ID, mailing information and check whether they are a corporation or not.

How to get the 1099 Form?

1099 Forms cannot be downloaded online, instead, it needs to be ordered from the IRS and pick them up.

What is the deadline?

The tax filers must send the 1099 forms to the vendors before 31st January. The compiled 1099 forms also need to be submitted to the IRS before 31st January. Based on state law, the tax filer also should file the 1099 MISC with the state.

Whether 1099 Form can be filed electronically?

When you have more than 250 forms to be filed, you can file them electronically. When you are required to file electronically but failed to do so, and also when you do not have the approved waiver, then you attract IRS penalty of about $100 per return. Up to 250 returns can be done through papers and not beyond that.

What should be done in the case of, foreign workers?

When you hired a foreign worker (non-US citizen) who works in the US, then you need to file a 1099 Form. You also require the foreign worker to sign and return Form W8BEN.

The Bottom Line:

Its time up, to start the 1099 process, and never ignore it. Make sure to finish the process before the deadline of 31st January 2020, so that you are saved from the huge IRS penalties. Never miss any rule while you file through us.