While the rules surrounding Form 1099-MISC can be very detailed and complex, this form is one that most taxpayers will either issue or receive. To help explain Form 1099-MISC and related issues, we have compiled the following FAQ. This helpful guide covers the nuts and bolts for both issuers and recipients of Form 1099-MISC.
Form 1099-MISC should be issued to any independent contractor who has performed any service for an amount greater than $600 per calendar year for a payor. This includes payments for rent, nonemployee compensation, gross proceeds paid to an attorney, and other income. Nonemployee compensation may also include contract labor, advertising, lawn care, janitorial services, and similar services that are often used by business taxpayers. Businesses should review all accounts and payment history to identify vendors who meet the payment threshold for 1099-MISC issuance.
As with most tax rules, there is an exception: generally, payments made to C and S corporations are not required to be reported on Form 1099-MISC. Importantly, only medical payments, attorney’s fees, and gross proceeds paid to an attorney are required to be reported on a Form 1099-MISC when paid to a C or S corporation.
In order for the 1099-MISC to be issued, a Form W-9 “Request for Taxpayer Identification Number and Certification” should be completed by the payee and submitted to the payor. Payors should try to obtain Form W-9 before issuing the payment to the payee to ensure they have the appropriate information when the deadline comes for filing Form 1099-MISC. The W-9 should identify the person or entity, including entity type, to whom the Form 1099-MISC will be issued along with the recipient’s current address and tax identification number (TIN). Payors should take advantage of any downtime in the last quarter of the year to review which payees should receive a 1099-MISC and to ensure that they have the appropriate Form W-9 for those payees.
The deadline to file a 1099-MISC for most types of nonemployee compensation (items included in Box 7 of Form 1099-MISC) is January 31, 2020. The deadline to file the form for any other services not included in box 7, such as rent, royalties, and gross proceeds paid to an attorney, is February 28, 2020 if filing electronically and March 31, 2020 if filing a paper form. Importantly, a company filing more than 250 information returns, such as a Form 1099-MISC, must file them electronically. If the company has 250 or less, paper filing is allowed although many taxpayers find filing electronically easier and more efficient.
Do you have other questions about issuing 1099-MISC, concerns about meeting the filing deadline, or a special circumstance that is difficult to navigate? P&N professionals are ready to assist! Contact us today for help working through your tax challenges.
Demi Kliebert contributed to this article.