1099 Reporting: Will your business avoid the penalties?
Updated: Dec 28, 2019
Businesses must prepare 1099 forms as part of their tax filing obligations
The "general rule" is that business owners must issue a Form 1099-MISC to each person to whom you have paid at least $600 in rents, services (including parts and materials), prizes and awards or other income payments, see examples of payments requiring 1099's to be issued. You don't need to issue 1099's for payment made for personal purposes, only for payments you made in the course of your trade or business.
Rules and deadlines for filing W-9 and 1099 forms are constantly revised and it’s important for small business owners to be aware of the changes to avoid unnecessary (and expensive, nondeductible penalties).
What's New for 2018?
Starting in January 2019, the IRS will institute new rules regarding how to submit 1099-MISC with Box 7 and those without Box 7.
If submitted improperly, companies may receive penalty notices for their non-Box 7 1099-MISC forms. These new rules apply to both paper and electronic filing.
What this means: After January 31, 2019, 1099-MISC with Box 7 filled in should be filed separately from 1099-MISC with any other box filled in.
As an example: On February 5, if you have a 1099-MISC with Box 7 and a 1099-MISC with only Box 1 filled in and your e-file provider has put them in the same record, as per last year's format, the MISC with Box 7 will be flagged as late, which indeed it is. The challenge is, however, that the 1099-MISC with Box 1 may also be flagged as late, even though it is not, since it is not due until March 31.
~ If paper filing ~
submit separately, each with its own Form 1096
~ If filing electronically ~
submit separately, each with its own Payer "A" Record
Form 1096 has been revised to reflect the addition of two new forms.
The backup withholding rate has been lowered to 24%.
If your principal business, office or agency (or legal residence in the case of an individual) is located in Wisconsin, use the new mailing address.
Department of the Treasury
Internal Revenue Service Center
PO Box 219256
Kansas City, MO 64121–9256
Do not report payments made with a credit card, gift card, PayPal or other electronic payment card, including third party network transactions.
If you file a physical Copy A to the IRS (mail it), you also need to complete and file Form 1096.
If a business owner receives a 1099's issued to them (individually) rather than to the LLC, you must file a Form 1099 with the IRS (the same type of Form 1099 you received) for each of the other owners (entities) showing the amounts allocable to each.
If you are required to file 250 or more information returns during the year, you must file electronically. The 250-or-more requirement applies separately to each type of form.
Find Additional Information
While we are, of course, available to provide you with any business, accounting or tax services, the information contained herein is general in nature; any advice regarding those services should not be construed as tax advice and is not intended as a thorough, in-depth analysis of specific issues, a substitute for a legal, accounting or tax advice or opinion, nor is it sufficient to avoid tax-related penalties to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact Strive Tax & Accounting, LLC or other tax professional prior to taking any action based upon this information. Strive Tax & Accounting, LLC assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.