Well friends, it’s that time of year to send out 1099′s and/or W-2‘s. Except for those few people still doing their own payroll, W-2’s are typically done by your payroll company or CPA/Bookkeeper. BTW…If you are still doing your own payroll, we really need to talk..
However 1099’s are often issued directly by a small employer who utilized some type of independent contractor to perform services for them. Form 1099 series is used to report various types of income other than wages, salaries, and tips (for which Form W-2 is used instead).
There are actually a number of different types of 1099, although this article is geared towards those small businesses who need to issue a 1099-misc.
As of 2011, several versions of Form 1099 are used, depending on the nature of the income transaction:
1099-A: acquisition or Abandonment of Secured Property
1099-B: Proceeds from Broker and Barter Exchange Transactions
1099-C: Cancellation of Debt
1099-CAP: Changes in Corporate Control and Capital Structure
1099-DIV: Dividends and Distributions
1099-G: Government Payments
1099-H: Health Insurance Advance Payments
1099-INT: Interest Income
1099-K: Merchant Card and Third Party Network Payments
1099-LTC: Long Term Care Benefits
1099-MISC: Miscellaneous Income
1099-OID: Original Issue Discount
1099-PATR: Taxable Distributions Received From Cooperatives
1099-Q: Payment from Qualified Education Programs
1099-R: Distributions from Pensions, Annuities, Retirement Plans, IRAs, or Insurance Contracts
1099-S: Proceeds from Real Estate Transactions
1099-SA: Distributions From an HSA, Archer MSA, or Medicare Advantage MSA
1042-S: Foreign Person’s U.S. Source Income
SSA-1099: Social Security Benefit Statement
SSA-1042S: Social Security Benefit Statement to Nonresident Aliens
RRB-1099: Payments by the Railroad Retirement Board
RRB-1099R: Pension and Annuity Income by the Railroad Retirement Board
RRB-1042S: Payments by the Railroad Retirement Board to Nonresident Aliens
Who needs to send out a 1099-Misc??
Every company paying “non-employee compensation” must complete a Form 1099 for each covered transaction, or person they paid. Four copies are made: one for the payer, one for the payee, one for the IRS, and one for the State Tax Department, if required. Payers who file 250 or more Form 1099 reports must file all of them electronically with the IRS. For payers who paid less than 250, and paper copies are filed, the IRS also requires the payer to submit a copy of Form 1096, which is a summary of information forms being sent to the IRS. The returns must be filed with the IRS by the end of February immediately following the year for which the income items or other proceeds are paid. Like with W-2’s, copies of the 1099 returns must be sent to payees by the end of January.
And here is the big mistake often made:
The law provides various dollar amounts under which no Form 1099 reporting requirement is imposed.
Specifically, for some Form 1099s, no filing is required for payees who receive less than $600 from the payer during the applicable year. In other words, if you paid someone less than $600, you don’t need to send them a 1099.
However I see, and have myself received in previous years, 1099-misc forms issued for amounts under $600.
Here’s some examples I’ve recently seen:
- if you are an mlm organization and have down-line members who earned less than $600, you do not have to issue them a 1099.
- If you run a promotional product company and have friends who occasionally send you business and you pay them a commission, if it was under $600, you don’t need to issue them a 1099.
- If you utilize a virtual assistant and paid that assistant under $600 for the year, you don’t have to issue them a 1099.For the complete instructions and other scenarios, please consult your tax advisor or visit:
If you have any questions on whether you need to issue a 1099-misc or not, or are still doing your own payroll, don’t hesitate to contact me.