UPDATE: New 1099 Reporting Requirements Repealed!
Small business owners, get ready! Starting in 2012, you’ll be facing a whole new world of 1099 paperwork.
The new health care bill included a small section (reference Section 9006) that mandates all companies to issue 1099 forms for all payments — not just services — and for all vendors, including corporations. What does this mean to you?
- If you sell products as opposed to services, you’ll be getting a lot more 1099s from your customers. Previously, 1099-MISC forms were used to report payments for services. Starting in 2012, 1099s will be issued for tangible goods as well. Whether you sell hardware, beauty supplies or widgets, your business customers will have to report their payments to you if they spend $600 or more with you in a calendar year.
- If you operate your small business as an S-Corp or C-Corp, you’ll be getting 1099s for the first time. Previously, 1099-MISC forms were only sent to non-incorporated businesses and service providers. Now, corporations will have to have their payments reported as well.
- More importantly, all small business owners will need to keep much better records on their vendors. Regardless of whether you hire a freelance graphic designer or buy a computer from Dell, you’ll have to report that purchase on a 1099-MISC at year-end if the total purchases from that vendor exceed $600 in a calendar year.
What can you do to prepare? Start requesting that each of your vendors, large and small, complete IRS Form W-9 for your records. This will give you the legal name, address and Tax Identification Number (EIN or SSN) for your vendor. This is the information that you will need in order to complete a 1099-MISC each January. Trust me, it’s easier to request and receive this information before your vendor has been paid than six months after the fact!
Deb Howard Greenleaf, EA, CEO and Principal, of Greenleaf Accounting Services provides virtual accounting and bookkeeping services and specializes in financial management to consultants, coaches, solo professionals, and other small business owners across the US. Deb is an Enrolled Agent (EA)—an IRS-licensed tax professional—and specializes in small businesses and entrepreneurs filing Schedule C or as an LLC. As an Advanced Certified QuickBooks ProAdvisor, Deb spends her day in QuickBooks Online and specializes in providing QBO support.
Great info thanks so much. I do have a follow up question.
What if I spend $601 in 2010 at Marriott brand hotels (2 x $300 stays are two different hotels)? How do we determine which business to 1099? Would I 1099 amazon.com if I spent $600+?
Deb Howard Greenleaf says
There’s a lot of guidance that will need to be issued from the IRS, but … the basic principle is that you will have to obtain the legal name and tax ID of the vendor at the time of the transaction, keep track of all that information all year long, then report the totals at the end of the year. So, in theory, if both Marriott hotels provide you with the same tax ID number, and the total expenditures for that tax ID equal or exceed $600, then you will need to report those purchases. It’s up to you to obtain the tax ID at the time of the transaction and I can only assume that Marriott and other large corporations will make this easy for you by providing that information on their receipts. It’s going to be a whole new world of reporting!
Is the 2012 date the reporting period or the filing year?
Deb Howard Greenleaf says
2012 is the reporting period, so the huge wave of new 1099s will be appearing in January 2013 when you’re reporting payments made in 2012.
What are the penalties for non compliance? I found something in one article, but they were not too specific. What is the penalty PER BUSINESS, and PER FORM? Thank you.
Deb Howard Greenleaf says
Under present regulations, the failure to file penalty is $50 per form, up to $100,000 for small businesses. If you fail to furnish the independent contractor with a statement, the penalty is $50 per statement with a $100,000 per year maximum.
Proposed legislation in the House of Representatives (HR3408, The Taxpayer Responsibility, Accountability and Consistency Act of 2009) would dramatically increase these penalties to $250 per form.
Pricilla Hilsenbeck says
Gday thank you for the previous post.
I would like to know if commission payments to broker dealers would qualify under the new reporting requirements.
Deb Howard Greenleaf says
Commission payments already fall under 1099 reporting rules. The only thing that might change is that broker dealers who were operating as a corporation will now receive 1099-MISC statements that were previously sent only to their peers operating as sole proprietorships and partnerships.
business world says
hah… only in small business
Uncle Marty says
I buy used gold and silver jewelry and silverware from the public.
The people I buy from are private sellers and in most cases are selling jewelry they received as an inheritance or was bought many years ago. Most do not have their original invoices.
Does this new law affect us and our customers?
Selling? Contact me at email@example.com
Located in Atlanta, GA. USA
Deb Howard Greenleaf says
At this point, only businesses need to submit 1099s to report their vendor payments; individuals do not. So unless your customers are in the business of selling their jewelry, they’re off the hook!
Does this mean that if I buy gasoline for my business-use vehicle, that I have to send a 1099 to each individual gas station at which I spend more than $600? If it’s charged to a “gas company” charge card, do I send the 1099 to the corporation or to the indidual station?
Deb Howard Greenleaf says
Technically, yes … crazy, huh?!?! There is already a proposed regulation, though, that would exempt purchases made by credit card. So as long as you pay for all that gas with your credit card, you won’t need to 1099 the gas station.
I’m sure the credit card companies are just lovin’ this!
I read on a blog this morning that in addition to the amount paid to a vendor we will also have to list what was purchased. The example given by the blogger was that a purchase of stationary would have to be listed as such on the 1099 form. Do you know if this is correct? It’s the first time I’ve heard of it.
Deb Howard Greenleaf says
Mary: For your own records you would certainly want to keep this information, but there’s no requirement to report that kind of detail to the IRS.
Thanks for the quick response! That is certainly a relief.
Hello Deb! My sincere thanks for the information that you have listed here! My company is in the business of buying and selling gold bullion. For individuals that call us to sell their bullion, would we be required to 1099 them (Most often these purchases would be over $10,000) or only the companies that we buy from? Also, does this mean that any company that buys their bullion from us will be required to send us a 1099 at the end of the year? (As a result requiring our company to reconcile the transactions for each company separately)
Deb Howard Greenleaf says
You send 1099s to vendors that you pay, so you would send a 1099 to anyone selling you goods in excess of $600 per calendar year. So, under the currently-proposed regulations, you will need to send them to both companies and individuals who meet those guidelines.
And, yes, you’ll be receiving a lot more 1099s, too, from anyone who paid you $600 or more.
There are current regulations under consideration, however, that would exempt purchases/sales paid for with credit card.
Thanks Deb! That’s what I was thinking, but your comment to Uncle Marty got me confused. I can already tell that this is going to be a lot of work for companies everywhere, but thanks to people like you we can get a head start!
Deb Howard Greenleaf says
Kevin: Sorry if I confused you. The key issue in both your question and Marty’s is whether the buyer of the product is a business or an individual. Only businesses need to issue 1099s for their vendors, not individuals. If your business buys products, it must report the sellers. If you then turn around that same product to an individual, they will not necessarily report you.
Could you please advise how this would apply to purchases from auction houses? Most often the auction house is selling & collecting funds for private individuals, less their commission fee. If I spend $1000 at an auction, do I need to do anything?
Deb Howard Greenleaf says
Jody: I am working off of three resources: (1) the current regulations for 1099 reporting, (2) the new legislation that has not yet been implemented with specific forms and regulations by the IRS, and (3) proposed legislation that would amend the new legislation. Based upon those sources, I can’t answer your question; you’ll need to see what the IRS puts in their new regulations.
What would the TIN number be for an individual selling jewelry, bullion, or in my case used textbooks to a business?
Deb Howard Greenleaf says
If you actually sell over $600 of used textbooks to a single business in a single calendar year, they will need to report the purchases via a 1099, per the new legislation. As an individual, your Taxpayer Identification Number (TIN) is your Social Security Number (SSN).
If you are filing as an individual and declaring all of your income from your online sales, is there an annual gross income threshold before you would required to file as a business instead?
Deb Howard Greenleaf says
Congratulations, Kris! If you’re making online sales then you already are a business … a sole proprietorship. There is no threshold for reporting your income. Even if you make twenty dollars, you’re supposed to report it. You won’t pay self-employment tax on your profit, however, if your profit is under $400. But you still need to report it on a Schedule C attachment to your annual 1040 no matter what.
Perhaps if there were not so many tax cheats and unreported cash transactions this would not be needed…hopefully the cost of complying will be lower than collections.
…re: bert’s note. IRS statistic indicates that for over 22 million schedule filers there are 354 billion potential missing dollars annually all do to under reporting of income or over reporting of expense. whats a cheater anyway! lol. The new 1099 rule? Gonna make some peeps very crazy. Me? It’ll keep me busy as 1099 data input is part of my “yob”!
Elaine Baran says
Hi Debbie – lots of great info here. You may know or could direct me to a source on this one. Almost all of our vendors for business are located overseas (in Japan). We pay them via yen purchased in the US and sent to our Japanese bank accounts. They are paid in yen in Japan. Would you see any scenario in which the US government would require us to create some sort of reporting document for those vendors? Some are US companies, like Hyatt, other’s are Canadian, like Four Seasons, and most are Japanese. Of course, in the hotel industry especially, there are often holding companies in between. I think that the purpose of the new regulations are to both uncover hidden income as well as illegal expenses and I read somewhere that one possible outcome of all the reporting would be to disallow business expenses that didn’t match up with 1099 reports. I foresee a reporting nightmare if I can’t figure out how this would apply to our business. Thanks for any insight.
The primary purpose of 1099 reporting is ensure that the vendor is reporting all of their income. So, if your vendors don’t need to report their income to Uncle Sam, then they don’t need to receive a 1099. This has been true for 1099 reporting for years and is not new with the new regulations. Now, if your overseas vendor is an American company with an EIN, then you will need to report those payments, regardless of their mailing address.
Fiscal Vendor says
Hi Debbie – Great information. I am a fiscal intermediary and we process medicaid waiver funding. We are reimbursing non-employee family members for mileage costs at the federally established rate per mile. Would these individuals require 1099 Misc.forms if reimbursed over $600.
Reimbursements are generally not reportable. Simple mileage reimbursements to an employee would not be reportable, so my best guess is that your reimbursements are not reportable either. For your specific situation, however, I would contact an industry group familiar with businesses such as yours. Remember, too, that these change in the law is so new that there are really no firm guidelines yet. We’re all just extrapolating based upon the current law.
Honey Willow Designs says
Great information here…I wasn’t even aware of this…makes me question if I really want to get into all of this nonsense with starting my small business from home again.
Trying to figure out how exactly this might affect me…I am a sole-proprietor…I work full-time by day and am a jewelry designer by night/weekend. This business is just on the side and my sales will be primarily online along with some craft shows/home shows…I will be paid mainly through PayPal and any purchases of supplies usually run through a credit card, PayPal account, or directly from bank account using check card. I sell to individuals…but my suppliers are obviously businesses. This is not my source of income, but rather just something extra on the side. My biz is 100% legit with dba, tas id, bank account, accounting records, inventory, etc.
I see that you mention there is legislation for items paid by credit card to be excluded so if that goes through I assume this nightmare will not be mine as I am pretty much 100% credit card on the income and the expense side. Does this sound right?
If this does not go through is the worst I can expect based on your description that I will have to send some 1099’s to those suppliers that I spend more than $600.
I do all my own accounting and taxes (as I am but a new and small biz and cannot afford help) so any heads up on this nightmare to come is most appreciated.
This brings up a lot of great points:
1. The fact that this is a side business for you is completely irrelevant. Every business owner, from Wal-Mart down to the smallest, one-person, couple-hours-a week entrepreneur, needs to comply with 1099 filing requirements. It doesn’t matter whether your business is a sole proprietorship, partnership, LLC, S-corp, C-corp or nonprofit.
2. How you get paid and how many types of 1099s you receive is technically irrelevant because you are required to report all of your income no matter what. Whether you get a 1099 from a customer or not, you should report the income they paid you. Whether they paid you by PayPal, check or cash, you should report the income they paid you.
3. Yes, the worst that you can expect under the new legislation is that you will now have to issue a lot more 1099s — to any vendor with whom you spent $600 or more over the previous calendar year.
sue fisher says
We have a question here. In an article that leaned toward farming, it stated that they could avoid these 1099s if they made payment by credit car as they are tracked differently. Do you know if this applies to any business or just the farming business?
Sue: While the exemption for payments made by credit card has been discussed by many, it is not yet law. At present, all payments for services need to be reported, regardless of how they were paid. Under current regulations, the new changes to 1099 reporting do not include an exemption for payments made by credit card. Obviously, this will result in a lot of duplicate reporting and even the IRS is aware of this flaw, which is why there is such pressure to exempt payments made by credit card.
From a bookkeeping perspective, though, such an exemption will be an absolute nightmare to track. Very few of my clients are on-the-ball with 1099 reporting to begin with. Throwing them the extra curve ball of keeping track of which vendors were paid via credit card versus business check might just be the straw that broke the proverbial camel’s back!
a Lee says
Why would paying by credit card be any different than paying with cash or check? Do credit card companies report deposits made into each business?
The merchant credit card companies are now being required to report to the IRS the amount of sales you earned through them. There has been some talk about “exempting” credit card transactions from the other new reporting requirement, but that is not yet been made law.
In my opinion, exempting credit card purchases would only make a bad situation worse. As a small business person who is required to send 1099s to my vendors, that would mean that I have to keep track of how much I pay each vendor, broken down by how I paid them … UGH!! A far simpler “fix” was suggested by Louisiana Senator to simply raise the reporting limit to $5,000.
Dave G says
We are considering sending 1099s to all vendors as if the new rule has taken effect. Besides possibly annoying some of our vendors, what other possible ramifications are there if we do this?
For those having to use their social security numbers
for reporting, this could lead to more identity theft.
Mississippi Queen says
As a business, what if I purchase something from an auction site, for say $10,000. They are actually selling these item for individuals or businesses and collecting a commission, so say I pay $10,000 total for an item with all fees, and the auction company gets 6% of that. They will get exactly $600 from this sale. Does any of this require a 1099?
If you fail to issue a 1099 to a service provider is the expense disallowed as a deduction? I own racehorses and it is a passive activity. I had no idea I had to issue 1099’s. My tax preparer never mentioned it either. At this point I have carryover losses going back to 2003, mostly on expenses to trainers, Vets and farms for board. What should I do? I have a horse now that might make a lot of money in 2011.. Any advice is appreciated..
Don: If the IRS issues you a non-filing penalty, then the penalty will be a non-deductible expense to your business.
I filed my income taxes. Is that what you mean by “non filing penalty” ? Or do you mean non filing of the 1099’s? I thought that was only a $50 penalty. Sorry if I am not understanding..
I misunderstood your question, Don.
You were asking whether you can deduct an expense if you failed to report the vendor’s payments with a 1099. I would think you should contact your tax preparer for a specific answer for your specific situation. In broad terms, however, a business expense is considered deductible based upon whether it is an ordinary and necessary business expense, not on whether it has been 1099’d.
Thanks, I will check with my tax person.
We are a small not-for-profit business and we currently rent office space from an individual that owns the building. We pay about $550/month in rent. So, with this new law, we would be required to get his TIN or Soc Sec # and send him a 1099?
Actually, under current law you should be 1099-ing your landlord, and should have been doing so for years!
I own a store that rents space in a strip mall. Does your answer to Sally mean that I should be sending a 1099 to my landlord for rent paid? If so, I have never heard of this. Thanks.
You bet. Quoting from the IRS instructions for the 1099-MISC: “Box 1. Rents. Enter amounts of $600 or more for all types of rents, such as real estate rentals paid for office space (unless paid to a real estate agent), machine rentals (for example, renting a bulldozer to level your parking lot), and pasture rentals (for example, farmers paying for the use of grazing land).” The only reason why you would not report rents paid to your landlord is if your landlord is a corporation.
Ooops….I just recently took over this job, so was going by what had been done by the previous person. It seems that my questions (about this and other things) have opened up a big can of worms here in the office.
I will contact our landlord and get his TIN.
Another question – will we also need to send a 1099 to our internet service provider?
Sally: Odds are that your service provider runs their business as a corporation, meaning they are currently exempt from 1099 reporting. It’s worth checking to make sure they’re a corp, though. And if the new 1099 laws aren’t repealed soon, you’ll be 1099-ing them whether they’re a corporation or not soon enough!
In 2010, for employees who paid 1099 eligble vendors directly and expensed those payments back to the company, would the company still be required to issue 1099s to the vendors? I am a little confused on this issue since the company did not pay the vendor directly. Does anything relating to this change in 2012?
That’s a good question. I would say yes, just to be safe, the company should issue the 1099 to the vendor regardless of the fact that payment was through employee reimbursement. From a bookkeeping perspective, however, this isn’t the most efficient solution and it would be cleaner for the company to pay the vendor directly.
Is there an exemption to this new law for small business based on employee size?
At this point, there are no exemptions for small businesses.
I am a owner of a S corporation, Chase Bank send to me a 1099 misc for a payment.
The payment was to my corporation and the 1099 misc is to my Name. what can I do?.
Will debit cards be treated like credit cards?
If you accept both credit cards and debit cards in your business as forms of payment, then payments made by debit card will be included in the 1099-K reporting from your merchant service provider at year-end.
I am confused on the 1099 requirements for Employees expense reimbursement. I am the AP Manager for a Partnership that has a specific policy and plan in place for expense reimbursement. We would not issue 1099’s to the employeee and it would be impossible to gather receipts to 1099 the business that they incurred the expense from. What happens in this case?
I would consult your company’s tax professional on this matter. In theory, it would be much cleaner to pay the subcontractor directly. In practice, you will need to rely on your tax professional for specific advise in the event that your employee pays an independent contractor and then requests reimbursement.
the bulk of our employee reimburseable expenses are for travel and are normally paid with a credit card. In this case there would be no additional 1099 reporting?
Jacob: Certainly, under current rules, 1099 reporting doesn’t cover travel expenses such as airfare, lodging or mileage. It’s looking likely that the current rules will stand and the expanded reporting requirements will be repealed in 2011. If so, you’ll continue to be off the hook for any additional 1099 reporting.
What happens if I change my own address on my 1099 using photo shop but the vendor sent in a 1099 to the IRS with a different address? I didn’t change any money amounts just my address.
As you generally don’t do anything with that 1099 other than keep it for your own records, nothing will happen.
was wondering,own a small construction buisness, do i 1099 the building supplies , bookkeeper, gas companies? will the irs be sending us information, as it is still confuseing?sometimes i buy small things from building supplies in cash are those also to be reported on 1099? and the 1099s start in 2013 for the 2012 year?
The full repeal of the new 1099 reporting requirements is imminent, so I’ll answer your questions under the existing 1099 reporting requirements.
Yes, you have to send a 1099 for any service provider for your business. This would include your bookkeeper, computer repair guy, cleaning service and so forth.
Yes, you have to report payments for services whether you pay by credit card, check or cash. The form of payment is irrelevant.
I have a vendor that we purchase gasoline from and the w-9 states they are an LLC. Are they 1099 reportable?
An LLC is not recognized by the IRS as such. Each LLC must “elect” to be taxed as one of the normal entities. If there is one member, an LLC may be taxed as a sole proprietorship, S-Corp or C-Corp. A multi-member LLC may be taxed as a partnership, S-Corp or C-Corp. So, in order to know whether to report your gasoline vendor, you’ll need to know how their LLC is taxed and the IRS has a handy-dandy form to find out that information, the W-9.
As full repeal of the new reporting requirements is imminent, though, it all may be a moot point!
I see that the House passed legislation that would repeal the new 1099 reporting requirements. What does this mean now? Will their be an official announcement on this soon?
It is not actually law yet, as the Senate has to agree with the House bill. But, yes, we should be hearing about a full repeal soon.
To be clear, the change is expected to start in 2012 for reporting on 2013? (Or reporting for 2011 in 2012?)
2012 is the reporting period, so the 1099s would be appearing in January 2013 when you’re reporting payments made in 2012.
Full repeal is expected soon, though, so this whole problem may go away before it ever goes into effect.
Accts Payable says
I handle the 1099 distribution for an HOA management company. I send a 1099 to every unincorporated vendor we paid $600 or more. Sometimes a homeowner will pay for a service out of pocket, but then I reimburse the homeowner. If the vendor they paid was unincorporated, then I send a 1099 to the homeowner if they paid at least $600 for the service. How does that individual need to handle sending a 1099 to the vendor that provided the service?
Personally, I think it is inappropriate to send the 1099 to the homeowner, as that tells the IRS that they provided services as an independent contractor … Which isn’t the case. It would be more appropriate to get a receipt from the vendor when reimbursing the homeowner, then 1099 the vendor directly.
If I remember right, Obama was elected with the promise to help the little people? How is forcing businesses to help the government take more money from them, while letting big business like GE pay zero income tax with a 9 billion profit, is helping the little people. The majority of big business pays little tax while showing record profits, with so many unemployed, while small business are dying on the vine. Not to mention executive bonuses from companies such as BP, after what they did. Even Warren Buffet admitted that he did not pay his fair share. Total insanity! The system is set up so that big business makes legal movements to get out of paying tax, and the rest mostly do not pay, or they would be out of business. Even if this were enforceable, and the government can get the $300b they claim they are loosing, all that can be accomplished would be that small businesses would be out of business, which gains nothing. Since big business is making record profits by streamlining businesses, laying off people, and reducing the salaries, the government will end up supporting these people with unemployed roaming the streets, and more violence I guess a reason for this, could be that the Dems realize that it is unenforceable, and allowed it in the bill so that the Republicans will sign off on the rest of the bill. I also hate how a bill is presented for one thing, and then 2000 pages are filled with stuff having nothing to do with heath care. Then when they realize that the money will not pay for the HC program, they can dip into the illegal Ponzi Scheme called Social Security again. I still wonder if the country will survive, though I can’t see how it would fall with so many guns. Looks like we will become more like Mexico, China, and the Philippines, with the rich, the poor, and almost no middle class, and the country surviving on the backs the the poor, and with the unions eliminated, as they are doing now.
Do you know if this new mandate has been repealed?
It sure has! Fully repealed back to the old rules. Scroll down through the previous posts … it was repealed in mid-March and all the gory details are in my post reporting the repeal.
Ok, I need some clarification please. I just started working in the acct. dept. for a federal credit union that is an exempt organization. They do no require W-9’s for vendors, nor do they do any 1099 reporting for any of the vendors they pay throughtout the year. I was shocked by this when I started here because my past experience is that a W-9 is required for all vendors and a 1099 is reported at the end of the year for total payments made to them. Should we be reporting these vendors?
We have an auction company and it does perform credit card transactions. Perhaps I do in one auction $1,000, we only make a commission on that $1,000 of $250.
So what do I do now, I don’t want to pay taxes on $1,000, when I only made $250.00.
What do we do in this sort of situation. Do we have to give the person that we are dealing with a form, do they have to fill something out, or do we do this.
We are really confused.
If you’re concerned about the new reporting requirements for revenue accepted through credit cards, then the answer is simple. Report all of your revenue ($1,000 in your example) so that your reported revenues match the numbers from the credit card merchant. Then report your outgoing payments ($750 in your example) as a Cost of Goods Sold. You will only be taxed on the remainder, your $250 commission.
I closed down my business and am selling some of my assets to a for-profit hospital. The requested a W-9 from my P.S.C. Why would a W-9 be requested for selling used goods?
Some larger organizations, such as this hospital, have an internal policy that ALL vendors in their accounting system need to have a W-9 on file. While this isn’t the law according to the IRS, it’s entirely legal for them to have such a requirement if you wish to do business with them.
Thank you for the information. It was very helpful.
I am the office manager for a surgical office. We contract nurses for our cases. So, I have several nurses who have made less than $600 this year. Do I need to provide them with a 1099 form? Our accountant has instructed me to…for what purpose? The nurses must file ALL of their yearly income, correct?
It’s possible that what your accountant wants you to do is to provide them all with a W-9 form. This form gathers their legal name, address and tax ID number in case you need to send them a 1099 at year-end. Many companies won’t pay a vendor until they have a W-9 on file for that vendor. So, I can see where it would make sense to get a W-9 from all of the nurses, regardless of how much you’ve paid them.
1099s won’t be issued until January, so you have some time to discuss the issue with your accountant. Certainly, there is no reason to send a 1099 to any nurse who was paid less than $600 during the calendar year.
Oh, and there nurses are SUPPOSED to claim all of their yearly income, but filing a 1099 will actually make sure they do it!
THANK OBAMA FOR THIS! this will put a nail in his coffin!
I a sole proprietor changes it dba name in the middle of a reporting year, do I provide a 1099 for each dba or 1 combining total payments of both dba’s? They are both for the same individual/business and using the same ssa #, so the only change is the dba name.
If your vendor is operating under the same number (either SSN or EIN) for the entire year, then only one 1099 will be necessary. You should use the most current d/b/a name when you file.
I’m a real estate agent and for the first time I’m going to be filling single(I became a widow on March of this year). My husband had no income for the first three months of the year. I will be getting several 1099’s misc. I think for around 28k.I I have a home , so I will be deducting around 11 k in interest plus some expenses for my R.E business. what will be the best way to file and how much taxes I will have to pay?
I would encourage you to run, don’t walk, to a local tax professional to discuss your circumstances. I won’t pretend to offer tax advice on this blog, but you very well may qualify to file as Married Filing Joint for this last year, which would be far more advantageous than filing Single. If you haven’t filed any election forms with the IRS, you will probably be filing a Schedule C form to report your income as a real estate agent; a tax professional can help you determine what expenses can be deducted from that income. A tax professional will also help you set up a system of paying in estimated tax payments on a quarterly basis. Even if you don’t use a tax professional every year, it would be a wise investment of your time and money to use one for this first year that you’ll be filing as a self-employed person!
The company that I do business with asked me to send the check to them on Dec 31 for the services they performed for my company this year. They told me that they will receive the check in January so they will pay the tax only once till next year for that payment. They told me that I can go head to issue 1099 for their service to IRS for current year. My question is will IRS require that company to report/pay tax for the service they provided to my company at current year because IRS already will have that information (1099), regardless the fact they will receive the payment in January next year and plan to pay tax for it next year. Is this a common practice among companies? Thank you for your help!
Is it a common practice to push income into the next year whenever possible? Of course it is! Will this cause them to have problems with the IRS? Not necessarily. This IRS is going to compare the total of all 1099s for that company against the total gross revenue that they report. They will only need to do some explaining if those their reported total is less than the total of all 1099s. Even in the event that they do need to justify their number, they’ll be able to do so if they can prove they didnt’ receive your check until January. Either way, this is their issue to deal with and not your problem!
I made a couple of trips to Hong Kong this year and hired a local computer art designer made a couple of draft of furniture design and I paid him $5000 cash. He is just a employee of a local company and he does not own any business. My expense on this project (travel and money paid to him) will be the cost to my business, but I don’t have anything to report to IRS because he is just a foreign individual resides in a foreign country. Will the check receipts/invoices on those expenses be sufficient as records in case required by IRS? Or is there anything else I should do?
You are correct that you don’t need to issue a 1099 form to a citizen of another country. As far as documentation, you should already have an invoice or receipt of some kind documenting the money that you paid to him. If not, go track him down and get one! Ideally, this receipt will also specify his address and identify him as a citizen of another country.
My daughter in law has a dog breeding business. This last year she ended up paying over 600 dollars for vet bills. Does she need to file a 1099 for the money she gave the vet for services?
If your daughter has a business and the vet is not a corporation, then yes. Normally, payments made to a vet are for personal purchases, which are not subject to 1099 reporting rules. But since your daughter has a business, then the 1099 reporting rules apply unless “the vet” is a corporation.
I work for a Timber Consulting firm, the timber company buying our client’s timber issues us a check made payable to our company’s escrow account, we then issue a check to our client and at the end of the year I issue a 1099 to our client for the timber sale proceeds. My question is..will the timber company have to issue our firm’s ESCROW ACCOUNT a 1099 for the amount the timber sold for? We dont normally get a 1099 from the timber companies, seeing how it goes through escrow and we are not keeping the money.
Thanks for the article, I had no idea I was looking at having to do so many more 1099’s at the end of 2012. Guess I will have to send a W-9 to our local telephone company, electric company, Office Depot, Wal-Mart, K-Mart and the local gas company. Geezs. Thanks for the helpful information.
Selena: Please see the updated blog post that fills in the details on how this change has already been repealed! You’re off the hook, as we are back to only 1099-ing for services, not products. For the sale of timber, no 1099 will be necessary.
I have a company i do periodic consulting for telling me that they will no longer accept my SSN as part of my W-9, and that i absolutely must have a separate EIN. Yet, since i am an unincorporated sole prop. i don’t need one according to the IRS. Is that company allowed to DEMAND an EIN from me?
You are correct, Kevin. You are legally allowed to use just your SSN.
You might consider getting an EIN, though. You have to give out a number, but you will protect yourself from identity theft a bit more by giving out your EIN instead of a social security number.
Thanks for the advice. I decided to cave and get an EIN rather than fight them (and not get the chance for any freelance work from that company again ;).
Lily Flores says
Is this law effective the year end 2011? that all payments made over $600.00 to the recipient we need to issue 1099misc. including corporations?
Lily: Please see the updated blog post that fills in the details on how this change has already been repealed! You’re off the hook, as we are back to only 1099-ing for services, not products, and not to corporations.
How do the new laws of 1099 reporting affect non-profits, specifically religious institutions?
As a nonprofit, you are subject to the same 1099 reporting requirements as other businesses.
I’m a hair stylist who rents my own room/studio at a beauty mall. I have a LLC and operate under a dba. I pay $900 per month in rent for my room to the LLC who owns the beauty mall. Do I need to send them a 1099? Additionally, if I purchased over $600 in product used to conduct my business (not to sell retail) do I send the beauty supply companies 1099’s as well? I’m so confused?
Jessica: The “new” changes to 1099 reporting have been repealed, so you do not need to send 1099s to your product supply companies. If your landlord is not incorporated, however, you do need to send one to them if you paid over $600 to them in a calendar year.
If I pay independant contractors via PayPal instead of a check, do I still send those contractors a 1099-misc or is it a 1099-k?
Beginning this year, merchant service providers like PayPal will be issuing their own notices (1099-K forms), so businesses only need to report payments that were NOT made through PayPal, credit or debit cards. So, if you only pay that independent contractor through PayPal, you will NOT have to send them a 1099-MISC. They will be receiving a 1099-K directly from PayPal instead (assuming they meet certain thresholds that PayPal has to worry about.).
Does a resident of Canada that did some freelance work in the US receive a 1099?
1099-MISC forms are only sent to people and companies that file U.S. tax returns.
If a vendor, which was normally reported on 1099-MISC, was paid through a third party payer, like PayPal, in 2011 but doesn’t reach the requirements/reporting thresholds under the new 1099-K, will they receive no 1099 from either PayPal and our company?
Sandra: I can only assume you are correct, which is truly bizarre since the whole point of the changes was to “catch” unreported income. My guess is that the end result is that there will be MORE unreported income because of these changes! That’s what happens when lawmakers try to tinker with things!
Kathy King says
Lisa, I am a small photography business that needs to report rent paid by the end of this month on 1099 misc to my landlord. I have asked him for his SS# but he has not provided. What do I do now and can I still claim the rent paid?
Also, I share the studio with three other people. We all pay well over $600. Only two of us are on the lease. I collect all the rent and write one check to the landlord. I am assuming that we each need to do our own 1099 misc? Thank you so much!
You can still claim the rent paid, but you should make sure they don’t get another rent check until they provide you with a completed and signed W-9 form!
To answer your other question, either all three of you should 1099 the landlord or you should 1099 him for the full amount of all rents paid … just make sure you don’t do both!
btw, … who is Lisa?
Hello. We have a small dairy farm with many custom hired vendors that we use throughout the year, manure haulers, bag rentals, combining, etc. So my question…for payments made by us to our vendors in 2011 do we need to 1099 to file 2011 return? Or is this for 2012 return?
All payments made for services to unincorporated businesses, including manure haulers, should be reported via 1099 forms. This has been in effect for 2011, prior years, and going forward in 2012 and beyond. So, yes! You should 1099 them for 2011!
I paid a photographer $1200 last year (2011) for a workshop. I paid via PayPal. Will I have to collect a W-9 from her?
Also – If I were to pay for that same service this year, does that mean I do not have to collect a W-9, since PayPal “may” issue one. I’m assuming it would be wrong for someone to collect two 1099’s, but how are you supposed to know if a vendor makes over $20000 on PayPal?
Effective with payments made in 2011, you do not need to include on a 1099-MISC payments made through a third-party payer, such as PayPal. So no 1099 will be needed for that photographer for either 2011 or 2012. From all the guidance I’ve read, it is not your responsibility to make sure that they ever receive a 1099-K instead (which they won’t if they don’t hit that $20,000 threshold).
I own a fitness gym who purchased over $600 in products (makeup to be exact) from an individual who sells Avon. I resold the makeup (not for profit). Even though that doesn’t matter, do i need to send the individual a 1099?
THANK YOU IN ADVANCE!
At present, payment for goods is exempt from 1099 reporting. You’re off the hook for payment for Avon products purchased!
I rent a house from an individual (who has several rentals). Inside that house 23.3% of the square footage is a home office (I’vd had home offices since 1972). If my rent is, say $1000 per month, do I need to send the landlord a 1099, and if so how much?
I’m thinking about buyong the place and how will I handle it then? Send myself a 1099?
A 1099-MISC was address to last known address of a contractor. The contractor have moved to a different county. Given that, what course need to be taken to the 1099-MISC issued. Do I need to issue a new one with the international address? Or just send to the international address what is already printed. Please advise and thank you.
You need to make your best effort to get that 1099 to it’s recipient, so go ahead and forward it to the new address.
Is there an exemption to file 1099 MISC if i have only less than 10 1099 vendors? or is it mandatory for me to file the 1099 MISC return even if i have 1 eligible vendor
There are no exemptions for filing 1099 forms if you only have a few vendors. Even one and you have to file a 1099, I’m afraid!
Do you have to issue a 1099-MISC for land rent paid to a trust?
To amplify CUF at 2/1/12, Fine about getting the 1099 to the recipient, its easy to readdress it, I think the question, and mine is 1) Do I need to void the existing 1099 and reissue a new one with the correct address to BOTH contractor and IRS, or 2) can I just forward the incorrect address on 1099 to the contractor at the new mailing list, and leave the original IRS copy as it was, or (Can I line out the existing copy, and put the changed address in its place. It is burden enough to collect the names. Do we need to babysit people and tidy up all the name changes as well?
Richard: To be honest, I don’t know the answer to your question. As several people seem to have the same question, it would be great if you were to contact the IRS to find out and report back!
We purchased certain assets from a partnership. Is this reportable on a 1099?
Nope. 1099-MISC forms are only for service providers.
I received a 1099 for tax year 2010 after I completed my taxes. I sold flatbed trailers so I was confused why I received a 1099, I didn’t provide a service. Now it’s coming back to me. Am I right to say I don’t agree with receiving the 1099, because I didn’t provide a service, I sold them property? Thank you.
Hi, Confused! If you reported the income from the sale of those trailers, then you don’t have any worries. Sometimes, it doesn’t make sense when you receive a 1099, but if it doesn’t upset your reported income totals, then it really doesn’t matter. I would contact that customer, though, to give them a friendly heads-up that a 1099 wasn’t necessary for products sold.
we have a vintage goods retail shop and we several vendors where we purchase our loot. We are an LLC. Do we need to 1099 all of our vendors that we pay out?
Hi, Carole! At present, you don’t need to 1099 vendors who sell merchandise. 1099 reporting is still limited to services.
We outsource some of our projects to a company in India. We paid them more than $30,000 in 2011. They are not an U.S. company. They cannot provide EIN or SSN to us. But we have to report the $30, 000 as our company’s expense.
Can we report the $30,000 as our Contract labor cost in the Schedule C Part II (11 Contract labor)without filing Form 1099? Any penality without filing a 1099 form?
Thanks in advance.
Lee: You can still deduct the expenses even though there is no 1099 to back them up (since you don’t send 1099s to foreign service providers). You should, though, have an invoice or paid receipt from them if you intend to deduct the expense.
I have a 1099-misc I received from a client of mine. I added the info in Quickbooks under income et.
Question is how do i handle the 1099 misc? just ignore it since i already reported the income? or do i report it somewhere else in Taxcut? (i do my own taxes)
please let me know
thanks for all the good advice btw
If you’ve already reported the income, Norman, then you’re all set! Just file away that 1099 with the rest of your 2011 documentation and you’re good to go. 😉
Janet Gray says
I was wondering what is considered a service provider. Some are obvious to me like companies that charge labor. But what about advertising? If I pay to run advertising on tv, radio or in print is this company a service provider or are they selling me a product?
Also could you please clarify the entities and whether they are considered incorporated. For example, S-Corp and LLC. Are both of these entities considered incorporated? I am assuming yes, but just wanted clarification.
Thanks in advance.
Unincorporated businesses include sole proprietorships, partnerships, and any LLC that doesn’t file “as a corporation” at year-end. And, yes, you just need to ask the LLC or you won’t know how they file.
Your other question is a bit trickier, but I would certainly include advertising as a service. I tend to err on the side of caution!
I am part of a 501(c)3 nonprofit organization. As members of our board we provide support to our events for a token payment per event ($12). I also receive mileage ($.40/mile). Does the organization need to issue 1099s if the annual amount is less than $600? Someone said we need to do this for anything over $100 beginning this year. The solution proposed was to handle these costs using a per diem for each director, which doesn’t make sense to me. Thanks for your help
If it’s less than $600 for the year, no 1099 is necessary … you’re off the hook!
What about sales tax on products? Do we need to exclude this from the 1099s? (ie every payment will need two line items, one for the actual product cost, and one for the tax?)
At present, no 1099 is needed on “stuff” …. only services. If the services are subject to sales tax, however, you only need to report on the fee portion, and not the total that includes sales tax.
In 2011 Paypal sent 1099’s for sales over $20,000.00. Does this mean that we will get a 1099 for 2012 for any sales, or does the 20,000.00 sitll apply to 2012 for Paypal?
Brenda Watkins says
Are memberships and dues to organizations such as Association of United States Army reported? Also, if we paid for sponsorship to a banquet is that reported?
Brenda, I think you’ll find that any memberships and dues are being paid to corporations, so you’re off the hook because of the exception for corporations. Similarly, most nonprofits are corporations, so any sponsorships paid to them would be exempt, as well.
Great info and timely as we are getting ready for the next filing season.
In the past I have used http://www.tax1099.com for all my 1099-Misc and 1099-K reporting. It worked great do you guys recommend any other website?
Should work again just fine. I’ve used efileforbusiness.com in the past and they work fine, too! 😉
In June of 2012 we organized a non-profit corporation, we operate a race track, all volunteer, pay the drivers who win from donations we receive. Do I have to issue a 1099 to the drivers who received over $600.00 for 2012 year in prize winnings? And what about Businesses that have donated money or services? Thanks!
I would speak to your tax preparer about the donations, Mary. You’ll more likely be issuing them donation receipts. But you definitely need to be issuing the drivers 1099-MISC forms for payments totaling $600 or more for the year.
Hi, I have a small towing business and tow for alot of auto clubs. Lets say for tows that I’ve done in dec. 2012 but do not receive a check until January 2013 do they put the income for that on the 2012 1099 they give me or on the 2013? I’ve filed each year going by the date of service rather than the date I receive the check.
Hi, Pam! 1099s are calculated based upon the date of payment and not the date of your invoice or the service date.
Can you tell me if I need to collect a w-9 and submit a 1099 to vendors when I use my credit card for purchases instead of writing a check? Thanks.
If you paid by credit card, you’re off the hook due to the new 1099-K reporting that is being done by the merchant companies. 😉
If I have a vendor that has both labor and product on an invoice but they did not separate them, do I send a 1099 for the full amount? Can I be held responsible for sending in “too much” if I can not determine what is what?
If the labor and product are not broken out, then you have no other alternative than to send a 1099 for the full amount.
Barb Walker says
Do we need to send 1099s to corporations and other businesses where we spend over $600 for purchases of products/and or services. I know we need to send to non-corporations where we have purchased services. The start of your post says we must send 1099s to corporations and for purchases of products.
Hi, Barb! Please read the “UPDATE” where the new regs were repealed … corporations are still exempt from most 1099 reporting.
Kara Kott says
Is there an issue if we send a 1099-MISC to a corporation? I know we aren’t required to unless it’s for legal services or healthcare. I am just wondering if there is a problem with us sending a 1099 to a corporation and then filing that information with the IRS? Also, if a corporation calls us inquiring about why we sent them a 1099, should we just tell them to ignore it? Do we need to delete it from our records before filing with the IRS?
Hi, Kara! As far as I know, there’s no harm, no foul in sending an unnecessary 1099. To be in true compliance, though, you should document the corporate status and stop sending 1099s to corporations. It’s only going to mean less work for you! And, yes, if someone calls you, just request a fresh W-9 from them and tell them you won’t do it for 2013.
Kara Kott says
If a corporation calls saying they received a 1099 in error, just tell them to disregard it? Do we need to delete the 1099 from our file that we send to the IRS? Wondering if there are any issues with us over-reporting money to the IRS (i.e., reporting money we paid to a corporation)?
How long does a company need to legally retain the 1099s that were mailed to our vendors?
Hi, Melissa! Much like other business documents, I would retain them for a good seven years from the time of filing.
North Carolina says
I received a 1099 Misc for a product I sold to a college. They put the income earned in Box 7 “Nonemployee compensation.”
Since this was income from a “tangible good” I sold to them, do I just ignore the 1099 and not include it when I am doing my taxes?
Do I notify the College and tell them they didnt need to file a 1099?
Victoria Tanaka says
I totaled up my electric bill and it was over 5000, do I 1099 the electric company?
Utility companies are usually corporations, so they probably fall under that exclusion!
Victoria Tanaka says
and the water bill is just as bad
Kara Kott says
So, if a corporation calls saying they received a 1099 in error, just tell them to disregard it? Do we need to delete the 1099 from our file that we send to the IRS? Wondering if there are any issues with us over-reporting money to the IRS (i.e., reporting money we paid to a corporation)?
I have been reading all the comments/answers here and on many other pages and have a question that hasn’t specifically been answered. I am not a small business, so I apologize if this is the wrong place to ask this. I am building a home and my general contractor just quit – it was a mutually desired outcome. I am taking over the rest of the house, which involves hiring sub-contractors (i.e. insulators, drywallers, painters, etc.). I have been told that I need to issue 1099’s to all sub-contractors that I pay $600 or more, but my understanding of everything I have read is that I do not have to do this since I am not a business and this is not my trade. Am I correct? If so, where can I find this exact information on irs.gov? I have read the entire 1099-MISC instructions and they do not say anything addressing my situation.