WHO MUST FILE FORM 1099?
Your business must file a 1099-MISC if you paid any person during 2017:
- Royalties or Broker Payments of $10 or more,
- $600 or more in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish (or any aquatic life) you purchase from anyone engaged in the trade or business of catching fish, or, generally, cash paid from notional principal contracts to an individual, partnership, or estate; any fishing boat proceeds or gross proceeds of $600 or more paid to an attorney.
There are additional 1099 filing requirements for transactions with individuals including forgiveness of debt of any existing or former employee, customer or contractor.
You are not required to file a 1099 for payments made to a corporation unless that corporation is composed of attorneys providing legal services for hire.
You are required to report payments to LLCs that are single-member LLCs (SMLLC) or an LLC treated as a partnership. LLC classifications are reported to you on Form W-9.
If you have any question regarding whether or not you are required to file, please contact our office because penalties for not filing can be substantial as you can see below:
Penalties for failure to file Forms 1099:
- First-Tier Penalty (failures corrected within 30 days of original due date): $50 per return with a calendar year maximum of $536,000. For small businesses, the calendar year maximum is $187,500.
- Second-Tier Penalty (failures corrected on or before August 1 of the year in which the original 1099 was required to be filed): $100 per return with a calendar year maximum of $1,609,000. For small businesses, the calendar year maximum is $536,000.
- Third-Tier Penalty (failures not corrected or corrected after August 1 of the year in which the original 1099 was required to be filed): $260 per return with a calendar year maximum of $3,218,500. For small businesses, the calendar year maximum is $1,072,500.
- Intentional Disregard for filing rules and regulations Penalty: $530 per return not filed.
IRS provides a form (W-9) for your supplier or service provider to complete.
This form is used for your supplier or service provider to tell you whether they are exempt from 1099 preparation and reporting.
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