If you run a business (even a very small one), you’ll want to get familiar with that number “1099.”
The Internal Revenue Service wants to know about many types of payments made in the course of doing business; so do some businesses or individuals that received payments. The IRS solution is Form 1099, which it calls an “information return.” There’s a large, extended family of 1099s and related forms.
Small businesses typically send Form 1099-MISC, which is short for “Miscellaneous Income,” for many types of payments. The forms go to both the IRS and the recipients of the money.
Fortunately, the businesses don’t have to declare payments made to corporations. A 1099 also is not required for buying physical goods, or for spending less than $600 during the year with a person/business. Those three exceptions cover a lot of territory.
Here are some types of financial (non-goods) payments that do have to be declared to the IRS and to the person/business receiving them:
o Rent paid to a partnership or any non-corporate owner for business offices or buildings.
o Wages or fees paid to independent contractors for their services.
o Gross proceeds of $600 or more that are paid to attorneys or law firms, even if they are incorporated.
o Prizes or awards paid to winners.
o Proceeds from crop insurance.
o Fees/expenses paid to physicians or other vendors for health care.
o Royalties greater than $10 from copyrights, mineral rights, patents and other sources.
On the 1099-MISC, business have to disclose more than $5,000 in consumer products that go to a buyer for resale outside of a retail establishment. Some small businesses also may have to file other varieties of 1099s to declare financial distributions, such as interest payments.
The deadline for mailing paper 1099s to payment recipients is Feb. 2, and they must postmarked to the IRS by March 2. But forms also can be sent out and filed electronically with the IRS.
Small business taxpayers can learn more about requirements for 1099s at this link: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Am-I-Required-to-File-a-Form-1099-or-Other-Information-Return
EricJohn Ltd. also can dig deeper with you into the details. We won’t let you forget sending a 1099 to your business’s landlord!