Who are you required to send a Form 1099 MISC? You are required to send Form 1099MISC to vendors or sub-contractors during the normal course of business you paid more than $600 by check/cash, and that includes any individual, partnership, Limited Liability Company (LLC), Limited Partnership (LP) or estate.
Who are considered vendors or sub-contractors? Essentially, this is a person or company you have paid for services that isn’t your employee.
What are the exceptions? The list is fairly lengthy, but the most common is that you don’t need to send a 1099MISC to:
Vendors operating as S or C-Corporations (you’ll find their status out when you get a W-9…see below)
LLCs or partnerships (ONLY if they are taxed as an S or C-Corp . . . again, see the W-9 below)
Sellers of merchandise, freight, storage or similar items.
Payments of rent to or through real estate agents (typically property managers). However, keep in mind you need to issue a 1099MISC to a landlord you are paying rent, unless they meet another exception.
Don’t worry about credit card payments and PayPal. The IRS allows taxpayers to exclude from Form 1099-MISC any payments you made by credit card, debit card, gift card or third-party payment network such as PayPal. (These payments are being reported by the card issuers and third-party payment networks on Form 1099-K.)
Lawyers get the short end of the stick. Ironically, the government doesn’t trust that lawyers will report all of their income, so even if your lawyer is ‘incorporated’, you are still required to send them a Form 1099MISC if you paid them more than $600.
The W-9 is your best friend. Some of you may be frustrated that you don’t have the information you NEED to issue the 1099. One of the smartest procedures a business owner can implement is to request a W-9 from any vendor you expect to pay more than $600 before you pay them. Using this as a normal business practice will give you the vendor’s mailing information, Tax ID number and also require them to indicate if they are a corporation or not (saving you the headache of sending them a 1099MISC next year). You can download aW-9 here. You can also search online for ‘form W-9’.
Both the IRS copy and recipient copies are due by January 31, 2019. E-filing the IRS copy is required for 250+ vendors. Additional rules may apply.
Please contact us if you receive any notices from the IRS related to 1099s as penalties may apply.