Taxpayer asks:
I am an accounts payable clerk for a manufacturing company. Who should we be sending 1099 forms to? What would happen if we sent a 1099 to someone in error?
Taxgirl says:
There are lots of forms 1099. Here’s a quick rundown of some of the most popular:
If your company pays out dividends, capital gains or interest of $10 or more, you would issue a 1099-INT or 1099-DIV.
Barter transactions, which are increasingly popular, are when you perform services or exchange goods rather than actual money. If you engaged in barter throughout the year, you would issue a form 1099-B.
If you issue a cancellation of debt when you are “organization having a significant trade or business of lending money” (probably not applicable to you), then you would issue a form 1099-C.
Pension plans and other retirement plans are reported on a form 1099-R.
The “biggie” is a form 1099-MISC. You generally issue a 1099-MISC when one of the following applies:
* Rent or royalty payments that are $10 or more; prizes or awards that are not for services, such as winnings on TV or radio shows that are $600 or more.
* Payments to crew-members by owners or operators of fishing boats including payments of proceed from sale of catch.
* Payments to a physician, physician’s corporation, or other supplier of health or medical services for $600 or more. These are issued mainly by medical assistance programs or health and accident insurance plans.
* Fish purchases of more than $600 paid in cash for resale.
* Substitute dividend and tax-exempt interest payments reportable by brokers of $10 or more
* Crop Insurance proceeds of $600 or more
* Gross Proceeds paid to attorneys
* Compensation to non-employees of $600 or more. This is generally payable to individuals or partnerships – not corporations. If, for example, you’ve farmed out typing or accounting work to an individual or partnership, you would issue a 1099 if the amount paid out during the year totaled $600 or more.
Here’s my rule, even though it may not be popular. If you’re not sure whether to issue the 1099, do it. The IRS may penalize you for not issuing a 1099 when you should have done so but there’s no real downside to issuing a 1099 when you should not have done so – that’s why, for example, you will often receive a 1099-INT for $3.53 when the threshold is $10.
For information about individual submitting a 1099, you might want to read here and here.
Good luck!
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
Are there any current regulations and or rulings on how to account for RAL loans for a cash basis taxpayer? IRS says none, regs are obsolite and before RAL’s, so don’t apply. I have been just expensing the cost and picking up the income. IRS is not telling me to ignor the cost and the income and just report the fee income. This is rather complicated since cash basis taxpayer you expense an item when the check is written report the income when income is received. The difference hits the botom line. Don’t really see anything to gain for IRS to insist on changing my accounting method for such short term loans. It comes out in the wash the same way, either way. so why would they try to change my method of accounting and really complicate my accounting for something so simple? This of course raises the issue of bad debt or losses on loans that sometime occur. They don’t know when “bad debts” should be written off and won’t give any guidance. Spent all day on phone today with business specialist and loan specialist and no one knew how a cash basis schedule C preparer should really report these short term loans because so new. Yet IRS wants me to jump thru hoops to arive at the same bottom line. Doesn’t make sense. Any support for continuing to treat these transactions just like you do for any expense and income item would be appreciated. Seems like they want me to report the net income currently, but wait for 4 yrs to write off any loans unpaid. Heck, you know they are bad right away when you don’t get your money, the taxpayer dies, files bankruptcy or won’t return you calls etc. Hardly no one is gong to pay you out of their own pocket if their refunds are not sufficient. I just treat these as bad debts in the year they are unpaid and report them in income in the event the taxpayer suddenly pays me next year or partially pays me. Just sole proprietor and don’t have resources to hire full time accounts receivable accountant just for RAL loans! Thanks!
Are CPAs like attorneys in that they get a 1099 no matter what the amount and whether or not they are incorporated?
Can you please clarify my doubts about 1099 contractor.
In our Indian company (head office in USA)we have three persons who are paid on hourly rate for their marketing support activities. They are disclosed as “Hourly Charge – 1099 Contractor” in our payroll. No deductions would be made while paying the amounts to them.
They are providing marketing services to the company and paid on hourly basis. In addition, if they incur any expenditure for the company, the same would be reimbursed along with this hourly payment.
One person was paid around 25k over the year from Jan to Dec’10.
Another person was paid 10k over the year from Jan to Dec’10.
Third person was paid 3.9k over the year from Jan to Dec’10
My doubts are …
What is the form to be filled (I think Form 1099)?
What are the details required to fill that form.
Please give me an example form which was already filled?
Who should file the form with whom?
When this should be filed?
what are the due dates and penalties if not filed in time?
The acconting year selected by our compay is April to March instead of Jan to Dec. Would this have any affect on the filing due date or on filling the form ?