1099 REPORTING REQUIREMENTS FOR SMALL BUSINESS CLIENTS

We would like to take this opportunity to remind you that every business must file informational returns (Federal Form 1099) with the IRS for certain payments made during the calendar year. On or before January 31, 2017, you must file Form 1099-MISC for each person (including partnerships and limited liability companies and excluding corporations) to whom you paid the following:

• at least $600 for services (including incidental parts and materials) performed by someone
  who is not your employee
• at least $10 in royalties, interest or dividends
• at least $600 for rents, prizes and awards, and other income payments
• at least $600 for legal services paid to an attorney even if the attorney is a corporation

You must report payments on Form 1099-MISC only when the payments are made in the course of your trade or business; personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. For this purpose, non-profit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements.

To properly report the information required on Form 1099, you need to have the service provider’s taxpayer identification number (TIN) and address. You should request that the provider fill out a Form W-9, Request for Taxpayer Identification Number and Certification, before work is done or payments are made. If a provider does not supply you with a taxpayer identification number, you are generally required to “backup withhold” 28 percent from any “reportable payments”. A blank W-9 is attached for your convenience.

The penalty for failing to provide accurate and timely 1099s increases significantly for Tax Year 2016. The maximum penalty for failure to provide a 1099 is $520 per form. A form is considered a document for the recipient or to the IRS.

If you would like our office to prepare your 1099s, please complete the attached 1099 Data Input Sheet. You may also send us a copy of your own report as long as all required information (recipient name, address, tax ID number, and amount paid via cash or check) is included. Please note that all 1099s must be sent to the recipients and the IRS by January 31, 2017 so it is imperative that you submit your information to our office by January 16th

Please contact Leslie Buckner (lbuckner@mrcpa.net) if you have any questions.