There is a lot of confusion concerning 1099s. Who gets one? Who doesn’t? What is the actual definition of a “Vendor”?
There are many other questions that we see every year. So, we thought it might be quite helpful to put together this handy one-page guide 1099 Information For Small Business.
We encourage you to read and/or bookmark this page for reference. We will update it each year to keep the information, fresh, current, and relevant for you.
What is a Form 1099-MISC
A Form 1099-MISC is an information return filed each year to report payments made in the course of running your business to certain vendors and under certain circumstances. Individuals are not the only ones for whom 1099s must be prepared!
What Vendor Payment Require a Form 1099-MISC?
At Least $600 in:
1. Rents 2. Services performed by someone who is not your employee, including parts and materials 3. Prizes and Awards 4. Other Income Payments 5. Medical and Health Care Payments 6. Crop Insurance Proceeds 7. Cash Payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish 8. Cash paid from a notional principal contract to an individual, partnership, or estate 9. Payments to an attorney 10. Any fishing boat proceeds
Direct Sales of at least $5,000
Direct Sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment
At Least $10 in Royalties or Broker Payments
At Least $10 in royalties or broker payments of consumer products to a buyer for resale anywhere other than a permanent retail establishment
Person/Vendor from whom any Federal Income Tax was Withheld
Form 1099-MISC is filed for each person/vendor from whom you have withheld any federal income tax (Reported in Box 4) under the backup withholding rules regardless of the amount of the payment.
The original is filed with the Internal Revenue Service Center and a copy is sent to the vendor
We know that this is overwhelming for any business owner
We are here to help businesses focus on their goals by helping with the books. If you feel that you are one of those businesses, meet with one of our Expert Accountants.
Personal payments are not reportable. Form 1099-MISC is filed for payments made in the course of your trade or business. Even though certain payments may be taxable to the recipient/vendor, they are not reported on a Form 1099-MISC. However, they may need to be reported on a Form W-2 or other information return.
Generally, payments to a corporation (including an LLC that is treated as a C or S corporation) *See note below
1. Payments for merchandise, telegrams, telephone, freight, storage and similar items 2. Rent payments to real estate agents or property managers 3. Wages paid to employees 4. Business Travel Allowances paid to employees 5. Cost of current life insurance protection 6. Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions. These are reported by the payment settlement entity on Form 1099-K.
Here are a few examples of some payments, even though paid to corporations, that generally must be reported on a Form 1099-MISC:
1.Medical and health payments reported in box 6 2.Fish purchases for cash reported in box 7 3. Attorneys' fees reported in box 7
What Vendor Information is needed and how is it obtained?
To report payments on Form 1099-MISC, you must obtain the following:
1. TIN of the Recipient (Taxpayer Identification Number) 2. Legal Name of Recipient 3. Address of Recipient 4. Type of Entity 5. Signature
This information is obtained by requesting a Form W-9 from each 1099-eligible vendor.
What happens if I don't have it?
If a vendor refuses to provide the W-9 information, their payments may be subject to backup withholding at the rate of 24%
If correct information return is not filed by the due date, without reasonable cause, you may be subject to a penalty. Penalties may apply:
1. Failure to file timely 2. Failure to include all information required 3. Failure to include correct information.
The Penalty may range from $50 per information return to $270 per information return
Does KAW Prepare and File 1099-MISC Forms?
Yes! We have been preparing and filing 1099's for our clients for well over a decade.
Your KAW Accountant will contact you throughout the year, and as December draws near, to make sure we have the taxpayer information needed for your 1099-eligible vendors.
What can I Expect from KAW?
In early January, all bank reconciliations will be completed through the preceding December, and your KAW Accountant review your file to wrap up any outstanding bank-related items to ensure that all prior year 1099-related data has been captured in your file.
In the event new/additional information is received after the deadlines and new or amended information returns need to be filed, KAW will do so promptly upon receipt of that new/additional information.
Electronic copies of your information returns are stored securely behind several layers of a password-protected cloud server.
Where can I find the Complete IRS Information on these?
The following PDF Documents are available online from the Department of the Treasury, Internal Revenue Service: