1099 Reporting

1099 Reporting Requirements

Did you properly issue IRS form 1099 Misc this year? If you have a trade or business and operate for the purpose of making a profit, then you fall under this category and should have issued 1099 Misc. Form 1099 should be issued to anyone your business pays $600 or more to in any tax year. This is any payments made to an individual or partnership. Generally speaking if you’ve made payments to a corporation, this is excluded. Payments to corporations are included only if they are for medical, health care, legal or fishing activities.

How do you determine whether or not the business you are dealing with is a corporation, sole proprietor, LLC, or partnership? When you begin doing business with a vendor have the vendor complete form W9, Request for Taxpayer Identification. These forms are for your records and are not submitted to the IRS. The W9 will help you determine how to treat their business. Form W9 is available to be downloaded from www.irs.gov

These are a series of questions and answers provided by the IRS which may help provide you with more information on 1099 reporting:

· Question: Is an S-Corporation treated as a “corporation” when determining whether or not a 1099 should be issued?
IRS answer: Yes. The entity is a C-Corp that makes an election to be treated as an S-Corp. When completing Form W-9, Request for Taxpayer Identification Number and Certification, the S-Corp checks the box for a corporation.

· Question: Does a 1099 get issued to a limited liability company (LLC) reporting to the IRS as a partnership or to a single-member LLC that is incorporated with the state?

· IRS answer: It is the federal tax status that matters. Therefore, if the LLC is a partnership, then 1099s should be issued as required.

· Question: If a company has a “doing business as” (dba) name and they list themselves as a corporation, is it correct they do not need a 1099?

· IRS answer: It depends on the type of payment. Corporations are exempt recipients but a 1099-MISC may be required under certain circumstances. See the Form 1099-MISC instructions for further information.

· Question: If a sole proprietor has a dba name, and the payments are made out to the dba company, do we use the company EIN number or the name of the sole proprietor on line 1. I thought if we used their Social Security number on Form 1099-MISC, then their first name should be listed on line 1 of the name section. If we used their EIN number, then their dba name would be listed first and then their individual name listed next.

· IRS answer: The sole proprietor’s name goes on the first line, the dba goes on the second line; this is true whether the EIN or SSN is used.

Currently the regulations governing 1099 issuances are set to expand on January 1, 2012. As part of the new Healthcare Reform, a section was added that includes issuing 1099’s to corporations and will also include goods (like office supplies). In other words, every time your business spends $600 or more to a vendor, you will need to issue a 1099 at the end of the tax year. This has the potential to be a paperwork nightmare and burden for small business owners. The good news is that President Obama stated in his State of the Union speech on January 25, 2011, We can start right now by correcting a flaw in the [health care] legislation that has placed an unnecessary bookkeeping burden on small businesses”. We look for the new regulations to be removed or substantially reduced.

Verace Accounting…

10950 N. La Canada #6204
Tucson, AZ 85737

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