To 1099 or Not to 1099

Starting with Tax Year 2011 on all Business Returns (S-Corps, C-Corps, Partnerships and Schedule C, Sole Proprietorships), there are two new questions regarding 1099 Reporting.

  1. If the Entity/Taxpayer made any payments that would require it to file a Form 1099
  2.  If “Yes” to the above question, did or will the Entity/Taxpayer file all required Forms 1099

In an effort to increase our client service and to avoid compliance penalties, here are four basic tips one needs to know with regards to paying independent contractors:

  1. $600 Requirement: Form 1099-MISC is required to be issued to non-corporate service providers (by January 31, 2012) who were paid at least $600 for services during 2011. Employers should look at the completed Form W-9 to determine whether or not the service provider is corporate or not.
  2. Electronic payments: Form 1099-MISC is not required if the contractor was paid electronically, such as by credit card, debit card, PayPal or gift card. The bank or credit card company that made the actual to the contractor will issue a 1099-K to them.
  3. Better safe than sorry: Employers who are unsure whether a Form 1099-MISC is required should send one. Employers can’t go wrong by sending more 1099s than required but could be subject to penalties if they do not send all required 1099s.
  4. File forms on time: Paper Copies of Forms 1099-MISC must be mailed to the IRS no later than February 28, 2012, or electronically by April 2, 2012.


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