With the IRS deadline for 1099 filing approaching, businesses across the United States are preparing to issue Form 1099-MISC to recipients, while individuals may be gearing up to get their ducks in a row as they too plan and prepare submissions.
When to file Form 1099-MISC
You are required file Form 1099-MISC for each person to whom you have paid during the year in the following ways:
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
- At least $600 in:
- Prizes and awards.
- Other income payments.
- Medical and health care payments.
- Crop insurance proceeds.
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
- Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.
- Payments to an attorney.
- Any fishing boat proceeds.
In addition, Form 1099-MISC must be used to report direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
If your business is in this position, you may be wondering what you need to do to comply with your responsibilities and obligations when it comes to the preparation of 1099-MISCs. This article looks into 1099 MISC form instructions.
1099 MISC Form instructions
You are required to furnish the payee statements by January 31 and file with the IRS by February 28 (March 31, if filing electronically). As such, Fusion CPAs recommend completing the following steps as quickly as possible:
1. Create a list of all individuals and business who you must issue a 1099-MISC to. As part of this list, you should include the amount of money that you paid them during the year.
2. If an updated version is not already on-file, ask each of these payees to complete Form W-9. You can find this document on the IRS website.
3. Using the information that you have gathered, prepare Form 1099-MISC for each payee and issue it to them and the IRS. This can also be submitted via the IRS’s all new Information Returns Intake System portal.
It is best practice for businesses to keep accurate financial records that showcases and justifies all payments made. Software solutions such as QuickBooks and Netsuite can help your business stay on top of the business partnerships that would qualify for the filing of Form 1099 MISC. Over and above this form, there are also a number of other types of 1099 forms which your business may be required to file to ensure compliance with IRS requirements.
Failure to file the relevant forms can result in penalties, so we encourage you to begin preparation on Form 1099-MISC or contact a Fusion CPA as soon as possible, if you need help. Our team can provide you with guidance on 1099-MISC form instructions via a free discovery call.
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