The purpose of Forms 1099 is for businesses to report to the IRS various items of income and deduction for a recipient. The IRS will match the information received on these forms to recipients’ tax returns, and if there is a discrepancy, the IRS will contact the taxpayer regarding the discrepancy.
NOTE: The exemption from issuing Form 1099-MISC to a corporation does not apply to payments for legal services provided by corporations or for payments for medical or health care services provided by corporations.
Link to example Form 1099-MISC:
Link to IRS instructions for preparation of Form 1099-MISC:
Gathering Information to Complete Forms 1099-MISC
Preparation of the actual Forms 1099-MISC is not difficult. But the determination of which vendors, service providers or other payees must receive a1099-MISC, as well as gathering and summarizing all of the information that must be reported, can be both challengingt and time consuming.
We recommend that businesses obtain the first two items of information each year on Form W-9 (http://www.irs.gov/pub/irs-pdf/fw9.pdf
) for each recipient before the first payment of the year is issued to the recipient.
The payment information can be automatically summarized in accounting software programs or can be summarized from detailed reports by payee.
Due Dates for Furnishing Forms 1099-MISC to Recipients
Generally a copy of Form 1099-MISC must be furnished to a recipient by January 31st of the year following the reporting year. Accordingly, for 2014 reporting, Forms 1099-MISC should be mailed to recipients by January 31, 2015. If, however, amounts are reported to 1099-MISC recipients in box 8 (substitute payments in lieu of dividends or tax-exempt interest) or box 14 (gross proceeds paid to an attorney), copies must be mailed to recipients by February 15, 2015.
Filing Forms 1099 MISC
This article is specific to Forms 1099 MISC, but the rules for filing apply to all types of Forms 1099. Businesses that submit less than 250 of any one type of information return can file paper Forms 1099. If a business files paper forms, specially prescribed forms must be used so that the paper forms submitted can be read by IRS optical character recognition (OCR) equipment. Most office supply stores sell the specially prescribed Forms 1099. (Do not attempt to download and print Form 1099 from the IRS web-site!) Failure to use the specially prescribed forms could subject the filer to a penalty of up to $100 per form.
Forms 1099 submitted on paper must be mailed to the IRS on or before February 28th of the year following the reporting year. Forms 1099 filers should submit copy A of Forms 1099 along with Form 1096 (Annual Summary and Transmittal of U.S. Information Returns) to the IRS at the address listed on Form 1096, based on the principal business location of the filer. Form 1096 is also a specially prescribed form and can also be purchased at office supply stores.
Businesses that must submit more than 250 of any type of information returns must file electronically using a system called FIRE (Filing Information Returns Electronically). The FIRE system is accessed via the Internet at https://fire.irs.gov/firev1r/default.aspx
. Users must have software that can produce a file in the proper format according to IRS Publication 1220. Businesses required to submit Forms 1099 electronically generally must obtain IRS approval to do so by submitting Form 4419 – Application of Filing Information Returns Electronically –
at least 45 days before the due date of the returns. The due date for filing 2014 electronic Forms 1099 is March 31, 2015.
Penalties Related to Forms 1099
The Internal Revenue Code includes penalties that may apply to businesses required to file Forms 1099. The penalties are applied, unless due to reasonable cause, for:
Generally, the penalties imposed are from $30 per return to $250 per return, depending on the type of failure and how soon the errors are corrected. There is a de minimis exception for returns that failed to include required information or include incorrect information if there was timely filing of information returns and if all errors are corrected by August 1st of the year following the reporting year.
Cautions and Recommendations for 1099-MISC Reporting
Payers must be careful to report payments to recipients in the correct boxes because the IRS uses 1099 information to match with recipients’ tax returns.
Each type of 1099 must be submitted separately with a separate Form 1096.
If after Forms 1099 are filed, the payer discovers that additional forms are required to be filed, the additional forms should be filed with a new Form 1096.
Send Forms 1099-MISC to recipients as early as possible so that any required changes can be made before the Forms 1099 are submitted to the IRS. This avoids filing corrected Forms 1099 with the IRS.
Paper Forms 1099 should not be folded but be submitted to the IRS in a flat envelope.
Mail paper Forms 1099 by certified mail and retain the certified mail receipt to document timely filing of Forms 1099.
Be sure to retain all Forms W-9 and other summarized information used to determine the correct amounts to report on Forms 1099-MISC in case you receive questions from recipients or from the IRS.
Stockman Kast Ryan and Company is here to help you with this year-end task. We can prepare Forms 1099-MISC for you or we can train you and/or your staff to not only prepare the 2014 Forms 1099-MISC but also assist with a jump start on the 2015 1099-MISC preparation process. We can assist with 1099 QuickBooks mapping and with implementation of procedures to gather and summarize all of the information required to file accurate 1099s as tax year 2015 progresses. Please call us at (719) 630-1186 or through our Secure Email
if we can be of assistance.