Even though the IRS has a thorough set of instructions available for 1099 processing, many people still find themselves unsure of who should receive a 1099 and what the minimum amount is. Others are unclear about when they need to mail the 1099’s by, or when they need to be filed with the IRS.
For the record, contractors, service companies, and property owners should all receive a 1099. General speaking, $600.00 needs to be paid out to that individual or service company before a 1099 will need to be processed. 1099’s generally do not need to be processed for corporations, although there are some exceptions. I’ve made a list of suggestions that you can use as a cheat sheet, or as a refresher of the basic rules you should know to make 1099 processing quick and painless.
- Run a preliminary report. Review closely and make sure that you have the appropriate TIN (Tax I.D. Number) or Social Security number prior to processing. At this time, you’ll also want to make sure that you have specified what type of payments you’re reporting (rents, other income, non-employee compensation) so that the totals will appear in the correct box.
- If your system does not track 1099 information and eligibility, be sure to investigate one of the 1099 processing programs that allow you to enter contractor/company information and payment totals separately from your accounting software. You do not want to process 1099’s manually. Take my word for it.
- If you typically make rental payments to owners electronically, be sure to check contact information prior to processing the 1099. This way, returned mail can be kept to a minimum.
- Don’t forget about contractors or other service people you’ve paid throughout the year. This includes cleaning services, carpet cleaners, electricians and painters. If you’ve paid them over $600.00, they will need to receive a 1099 as well.
- Attorney fees paid will require a 1099 regardless of whether they are a corporation or not.
1099’s must be in recipients hands no later than January 31st of the current tax year. The IRS requires that you file all 1099 information with their agency by March 31st. Be sure to promptly follow up on any subsequent IRS notices after filing, such as an incorrect TIN and update your own records accordingly.
If you’re still confused, visit the IRS website http://www.irs.gov/instructions/i1099gi/index.html, where you’ll find more in-depth information on 1099 processing.