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1099 Reporting for Small Business

1099 Reporting.  If any payments to vendors over $600,  you must issue a 1099.  Failure to do so can result in a fine per violation.  This reporting is going to cause a lot of headaches and wasted hours filing reports.  These are the requirements from the IRS website.

IRS FORM 1099 REPORTING REQUIREMENTS

The Internal Revenue Service (IRS) requires businesses (including not-for-profit organizations) to issue a Form 1099 to any individual or unincorporated business paid in excess of $600 per calendar year for services rendered. This is required whether these payments are spread out over the course of the year or are paid in one lump sum payment.  This form is generally not required to be issued to incorporated businesses. The only exception is when payments are made to incorporated law firms. A 1099 must be issued whenever payments in excess of $600 per calendar year are made to law firms.

The most effective way to obtain the information needed to prepare the Form 1099 is by requiring that an IRS Form W-9 be completed prior to any payment being made. Blank W-9 forms can be obtained on page two. The penalty for failure to file Form 1099 can be as much as 50% of the amount paid for services. The responsibility for filing the Form 1099 is on the organization paying for the services (each state component). It is the responsibility of the individual/business receiving the Form 1099 to handle it properly on their tax return. 

The most immediate impact of this issue is on district payments to Adjudicators and other individuals. To be in compliance with IRS regulations, component association’s state offices must keep files of all payments made by district and state offices to individuals and unincorporated businesses so that at the end of each calendar year 1099s can be issued when appropriate. 


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