Filing form 1099 Misc

RS Form 1099-MISC is an information return that tells the IRS and other government agencies that the person named in the form has received taxable payments during the year. It's one of the IRS's main weapons in fighting under reporting by the self-employed.

The IRS may impose various monetary penalties if a hiring firm intentionally fails to file a Form 1099 when required.

When must Form 1099-MISC be filed

The basic rule is that you must file a 1099-MISC whenever you pay an unincorporated independent contractor -- that is, an independent contractor who is a sole proprietor or member of a partnership or LLC -- $600 or more in a year for work done in the course of your trade or business.

If you're a broker who employs independent contractor agents, you need to file 1099-S for them, as well as any other contractor you paid at least $600 during 2016. Remember, however, that a 1099-MISC need be filed only when an independent contractor's services are performed in the course of your trade or business. A trade or business is an activity carried on for gain or profit.You don't have to file a 1099-MISC for payments for non-business related services. This includes payments you make to independent contractors for personal or household service -- for example, payments to babysitters, gardeners and housekeepers.

Running your home is not a profit-making activity. Example: Jimmie owns several homes he rents out to tenants. He is in the business of renting houses. Jimmie pays Linda, who operates a painting business as a sole proprietor, $1,750 to paint one of his rental houses. Jimmie must report the $1,750 payment to Linda on Form 1099-MISC.

Example: Jimmie pays Linda $1,750 to paint his own home. He lives in this home with his wife Bernice and their kids and it is not a part of his home rental business. Jimmie need not report this payment on Form 1099-MISC because this work was not done in the course of his business.

In addition, some business-related payments do not have to be reported on Form 1099-MISC, although they may be taxable to the recipient. These include:

  • payments to corporations (except for incorporated lawyers)
  • payments for merchandise, telephone, freight, storage, and similar items, and
  • payments of rent to real estate agents (but the real estate agent must use Form 1099-MISC to report the rent paid over to the property owner).

How and when to file Form 1099-MISC

Form 1099-MISC is a multi-part form. Here are the parts of this form and where to send each:

  • Copy B and Copy 2 are for the independent contractor and must be provided no later than Jan. 31.
  • Copy A must be filed with the IRS no later than Feb. 29, or March 31 if you file electronically.
  • Copy 1 is for your state taxing authority if your state has a state income tax; the filing deadline for most states is Feb. 28, but some states require earlier filings -- check with your state tax department.
  • Copy C is for you to retain in your files.