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1099 Rules


January 13, 2020

1099 Rules 

As a general rule, you must issue a Form 1099-MISC to each person to whom you have paid at least $600 in rents or services.  You don't need to issue 1099s for payments made for personal purposes. You are required to issue 1099-MISC reports only for payments you made in the course of your trade or business, and you'll send it to any individual, partnership, Limited Liability Company, Limited Partnership. The penalties for not doing so can vary from $30 to $100 per form. 

The list of exceptions is fairly lengthy, but the most common is that you don't need to send a 1099 to corporations or for rent payments to real estate agents.

Lawyers get the short end of the stick here. Ironically, the government doesn't trust that lawyers will report all of their income, so even if your lawyer is 'incorporated,' you are still required to send them a 1099 if you paid them more than $600.

One of the smartest procedures a business owner can implement is to request a W-9 from any vendor you expect to pay more than $600 before you pay them. Using this as a normal business practice will give you the vendor's mailing information and Tax ID number, and it'll also require that the vendor indicate whether they are a corporation or not (saving you the headache of sending them a 1099 next year)

Finally, you are required to issue and essentially mail out all of your Form 1099s to your vendors by January 31. Let us know if we can help with this process.

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