1099 Deadline Fast Approaching

What is Form 1099-MISC?

Form 1099-MISCis used to report certain types of payments made in the course of a trade or business. If you're in business or self-employed, you may need to submit this report to both the Internal Revenue Service and the person or business whom you paid.

When is Form 1099-MISC Required?

Businesses will need to fill out a Form 1099-MISC for persons, vendors, subcontractors, independent contractors, and others in the following circumstances:

$600 or more per year is paid for

  • cash payments to fishermen
  • crop insurance proceeds,
  • medical and health care payments,
  • prizes and awards,
  • proceeds paid to attorneys,
  • rents,
  • services (including parts and materials), and
  • other types of payments not covered by another information reporting document.

$10 or more per year is paid for

  • broker payments in lieu of dividends or tax-exempt interest, and
  • royalties

Reporting such payments is required if the recipient of the payment is not a corporation -- for example, when the recipient is an individual, partnership, a limited liability company treated as a partnership or sole proprietorship. Payments made to corporations are required in the case of medical and health care payments and in the case of legal fees paid to attorneys. Other types of payments made to corporations may be reported using Form 1099-MISC, but is not required.

Steps to Take to Prepare for 1099-MISC Forms

You should request that your vendors, contractors and other payment recipients submit to you a Form W-9 . The W-9 will provide you with the legal name, address and taxpayer identification number for the vendor, which is the information you will need when preparing any 1099-MISC forms.

You should also keep track of your payments in your bookkeeping system. You will need to know whether the payment falls under any of the categories listed above for reportable payments, whether your payments to a particular recipient reaches the $10 or $600 threshold for reporting, and finally you'll need to know the exact amount you paid the recipient for the year.

Penalties for Filing Form 1099-MISC Late

The following penalties will be in effect for the year 2014:

  • $30 penalty for filing a 1099 not more than 30 days late. Maximum penalty is $250,000
  • $60 penalty for filing a 1099 more than 30 days late and before August 1. Maximum penalty is $200,000.
  • $100 penalty for filing a 1099 on or after August 1. Maximum penalty is $1,500,000
  • $250 penalty for intentional failure to file.

Deadlines for 1099-MISC Forms

  • Provide the recipient with his or her copy of the Form 1099-MISC by January 31 reporting income for the previous calendar year.
  • Mail the Form 1099-MISC to the IRS by March 2.
  • Or electronically file Form 1099-MISC with the IRS by March 31.

How to prepare for Filing your 1099’s with QuickBooks

  • Run your Expense by Vendor Summary report
  • Determine which of you vendors fall under any of the following 3 categories.
  • You paid the vendor over $600.00
  • You paid rent to the vendor whether or not it is over $600.00
  • You paid legal fees to the vendor whether or not it is over $600.00
  • Check that you have a W-9 on file for those vendors that fall into the above categories. If you do not have a W-9 on file for them request that they fill one out for you even if you are sure they are a corporation. Better to have one on file then to not have one.

If you have any problems with these initial steps to prepare for issuing your 1099’s for the 2014 tax year please contact your CPA or Bookkeeping Professional. There are stiff fines associated with the not filing your 1099’s by the March 2nd deadline.