Who Gets a Form 1099 and When are They Due?

As the year draws to an end, many business owners face the challenge of determining which of their vendors will require a 1099. Failure to comply with this requirement may result in fines based on a per filing basis. However, with some basic planning this annual process is not as daunting as you may think.

When are they due?

New this year, Form 1099-MISC will be due to the IRS by January 31 if reporting non-employee compensation payments in box 7. Otherwise, for all other boxes on the 1099-MISC, 1099-DIV and 1099-INT the next filing dates are February 28 if filing by paper, or March 31 if filing electronically.

What type of payments qualify for a 1099?

In general, payments for personal services of at least $600 require 1099-MISC. Common examples include:

• YES – Services, retainers, honorariums and similar
• YES – Attorney fees of any kind
• YES – Rent, unless paid to a real estate firm
• YES – Board of Director fees
• NO – Employee expense reimbursements
• NO – Goods, supplies and merchandise
• NO – Telephone charges
• NO – Insurance payments
• NO – Freight charges
• NO – Anything paid for with a credit card

Who gets a 1099?

After meeting the minimum requirements for a 1099, you need to refer to box 3 on form W-9. In this box, you will find the criteria which determine what tax entity gets a 1099. You may download Form W-9 from the IRS site.

Federal tax classification:

• YES- for LLC’s who selected “P” on the W-9
• YES- for partnerships
• YES- for all attorneys
• YES- for individuals or sole proprietors (helpful tip: if their tax ID number is in the form of a social security number, then this is definitely a YES)
• NO- for nonprofits
• NO- for corporations
• NO- for LLC’s who select “C” or “S”

Best practice tip:

It is a good business practice to request W-9 forms from your vendors throughout the year prior to making your first payment. As a result, this will save you time and headaches as you begin to determine which vendor will require a 1099.

Schedule a consultation with an experienced Aprio advisor to discuss your Government Contracting needs.