As the calendar year draws to a close there are a number of important tax-related housekeeping items that require an employer’s attention. Chief among these is Form 1099 reporting, which is required for certain payments made in the course of business or trade.
The IRS has fairly strict Form 1099 reporting requirements. Below is a brief overview of some of the important requirements of which you should be aware. For a deeper understanding of Form 1099, check out our complete guide to 1099 reporting requirements for the 2015 tax year.
Do You Have to File Form 1099?
Starting a few years ago, the IRS has included this question on business tax returns: “Did you make any payments in 2015 that would require you to file Form(s) 1099?” Answering “yes” prompts the next question: “Did the business file or will it file all required Form 1099’s?” This line of questioning is a mechanism to help the IRS assess penalties for any unfiled forms. The 1099 filing requirement is on an “entity-by-entity” basis, so a business owner with multiple entities will need to answer the questions individually for each one.
Common Requirements for 1099 Forms
The most common Form 1099s are the Form 1099-INT/1099-DIV and the Form 1099-MISC. A 1099-INT or 1099-DIV is required if you paid $10 or more of interest or dividends. Form 1099-MISC is required to be completed and filed with the IRS for any unincorporated vendor to whom you paid $600 or more for services or rent during 2015. Specific examples of reportable payments include:
- Services for building or equipment maintenance repair such as painting or lawn care
- Veterinarian fees
- Prizes and awards
- Reimbursement of overpaid mortgage interest
- Feed mixing and machine hire
- Fees paid by one professional to another, such as fee-splitting or referral fees
- Transactions for the sale or exchange of real estate
1099s must be mailed to the recipient by February 1, 2016, and a copy should be mailed to the IRS by February 29, 2016. There is a late-filing penalty of $30, $60 or $100 per 1099 depending upon how late the filling is made. A 30-day extension can be requested via Form 8809.
Companies doing business in Pennsylvania or compensating employees for Pennsylvania-based work must also file copies of federal Form 1099-MISC with the PA Department of Revenue. These copies are due at the same time as the IRS filing deadlines.
Contributed by Natalie G. Fuhrman, CPA, Manager in RKL’s Small Business Services Group. She specializes in providing accounting services to medical and professional service organizations, as well as manufacturing and real estate entities. She is also responsible for providing tax services for business and individual clients.