Your business is generally required to issue Form 1099-MISC to all unincorporated service providers to whom it pays $600 or more during the calendar year. Unincorporated service providers include sole proprietors, partnerships, and LLCs not electing to be taxed as a C Corporation or S Corporation. For payments to an attorney or a law firm, reporting of calendar year payments of $600 or more is required regardless of the entity type. If you are reporting nonemployee compensation on 1099-MISC (box 7), the form is due to the IRS and recipients on January 31. Otherwise, the 1099-MISC is due Feb 28.
Reporting for Businesses Receiving Services:
If your business is not already issuing Form 1099-MISC to its service providers, follow the steps outlined below to comply with the reporting requirements:
- Implement the requirement that all service providers and vendors return a completed Form W-9, Request for Taxpayer Identification Number and Certification. This form should be obtained from all service providers and vendors to whom payments of any amount are issued, whether you believe a Form 1099-MISC should be issued or not. Keep the completed forms for your records.
- Issue Form 1099-MISC to all service payees following the end of each calendar year. (Issuance of Form 1099-MISC to incorporated businesses is not required, but it may be difficult to know their classification. Therefore, the simpler approach may be to issue a 1099-MISC to all payees.)
- If parts and materials are included with the service you received, report the total invoice on the 1099 (including materials).
- For each Form 1099-MISC you issue, file a copy with the IRS. Form 1096, should be submitted with the Form 1099-MISC copies. Form 1096 is a summary of the 1099 Forms being sent to the IRS.
Reporting for Businesses Providing Services:
If your business provides services, your customers/clients must obtain your taxpayer identification number (TIN) in order to report to the IRS amounts paid to you. To obtain your TIN, your customers/clients may request that you complete a Form W-9, Request for Taxpayer Identification Number and Certification. Here are some important points regarding Form W-9:
- On Form W-9, you are required to provide your business name, address, TIN and federal tax classification (sole proprietor, partnership, LLC, or corporation).
- To prevent backup withholding on any payments due to you, you must sign, date and send the Form W-9 to the requestor (your customer/client) for them to keep on file. Do not send Form W-9 to the IRS.
- You must provide an updated Form W-9 if any of your information changes.
- Keeping a number of pre-populated copies of your Form W-9 on hand will save you time if you receive numerous requests from customers/clients.
- Each requestor will use the information from your Form W-9 to prepare and issue to you (as well as the IRS) a Form 1099-MISC, reporting the income paid to your business that equals or exceeds $600 during a calendar year.
Although Form 1099-MISC is often used to report payments for services, it is also used for reporting other types of payments. Refer to the table below for a summary of the Form 1099-MISC reporting requirements, including reporting due dates. In addition to Form 1099-MISC, there are multiple information returns that may be required for payments to various parties. For a complete list of these, see pages 25, 26, and 27 of the General Instructions for Certain Information Returns.
If you have any questions about 1099 – MISC reporting, contact the professional at Gilliam Bell Moser LLP