We would like to remind our clients that if you operate a business in any form, you may be required to file one or more Forms 1099 for the calendar year 2017. The IRS has announced that it intends to make compliance with the filing of these forms a major part of its efforts to raise tax dollars. The penalties can be severe if the forms are never filed, and the penalties can be expensive, frustrating and irritating if the forms are filed late. We are here to help, but you need to ask us for that help if you are not going to be filing the forms yourself. You do not need to issue a Form 1099 for payments made for personal purposes.
A Form 1099-MISC is required for each individual or non-corporate entity to which your business has paid at least $600 for services (Box 7) or rents (Box 1) during the 2017 calendar year. With one exception, a Form 1099-MISC does not need to be completed if the service provider is a corporation, but the burden falls on you to find out if the business is incorporated. If you are in doubt, it is always better to go ahead and file the Form 1099. Included in the $600 filing requirement are payments to lawyers and law firms, whether the lawyer or law firm is incorporated or not. Payments for legal services in the normal course of your trade or business are reported in Box 7. Gross proceeds paid to an attorney as part of a settlement agreement must be reported on Form 1099-MISC in Box 14 (Code A).
In order to properly process a Form 1099, the government requires that the form show both the payor and payee’s Federal identification numbers (or social security numbers) and mailing addresses. Each business to which a Form 1099-MISC is to be issued is required to provide you with this information. Typically it is done on a Form W-9, but any method will suffice. If you are approaching the deadline and the payee has not provided you with the necessary information, it is better to file an incomplete form than no form at all. However, the rule goes on to say that for anyone who does not provide you with that information after you have requested it in writing you are REQUIRED to withhold 28% federal tax and pay it over to the IRS on Form 945. If you fail to withhold it, then you may be personally responsible to the IRS for the payment. It is a terrible trap.
Forms 1099-MISC that have an amount in Box 7 are required to be mailed to your vendors and to the IRS by January 31, 2018, whether they are paper-filed or electronically-filed. Note that this is a change from prior years. You must adhere to the new filing deadline in order to avoid penalties. For all other 1099-MISC forms with other boxes completed, you still have to mail the 1099’s to your vendors by January 31, 2018 but you have until February 28, 2018 to mail the forms to the IRS unless they are submitted electronically, in which case the deadline is extended to March 31, 2018.
Louisville Metro Revenue Commission has the same rules for Forms 1099-SF, so they must be filed as well. The Commission is doing a better job each year in tracking down errant taxpayers.
Should you have any questions regarding the above, please feel free to call. Don’t procrastinate on getting the 1099’s out!