A 1099-MISC is an information return that is used to report miscellaneous income. Payments to an individual / sole proprietor or an unincorporated business (i.e. a Limited Liability Company) for rent or services in excess of $600 should be reported on this form. Payments in excess of $600 to attorneys for legal fees should be reported on this form regardless of the attorney’s entity type. These forms are due to the recipient by January 31st and to the IRS by February 28th of the following year.
In order to help you gather information throughout the year on your vendors, the IRS advises that you have each vendor complete Form W-9 Request for Taxpayer Identification Number and Certification. The purpose of this form is to gather the name, address, entity type, and taxpayer identification number for each vendor. The information on this form can later be used to prepare an information return with the IRS. Since this form provides you with the entity type, it is a useful resource in determining if a 1099-MISC is required for a specific vendor. Remember, only individuals/sole proprietors, unincorporated businesses, and attorneys are required to receive a 1099-MISC.
Completing the Form W-9 at the time you engage a service with a vendor is much easier than trying to track down a vendor in January when you are trying to prepare the 1099-MISC forms for the previous year’s service. Now is a great time to review your vendor files and if need be have your vendors complete or update Form W-9. By completing this work now, you will ensure your vendor files are in order so that your 1099-MISC can be timely prepared during January 2011. You can find a copy of Form W-9 at http://www.irs.gov/pub/irs-pdf/fw9.pdf.
The above information is based on our current tax laws for 1099-MISC reporting. However, this area could be changing in the near future. With the passing of the 2010 health care legislation, the 1099-MISC information reporting is scheduled to undergo vast changes for payments made after December 31, 2011. These changes include:
- There will no longer be a corporate exception. All entities (except tax-exempt organizations) would be eligible to receive a 1099-MISC regardless of their entity type. Currently you only report 1099-MISC to individuals/sole proprietors or unincorporated businesses (i.e. a Limited Liability Company).
- Payments for goods and services greater than $600 would need to be reported. Currently you only report services greater than $600.
If these changes for 1099-MISC take effect, the accounting and documentation requirements would increase significantly. Taking time now to update your vendor files could save you time down the road.
About Blackman & Sloop CPAs, P.A.:
Blackman & Sloop is a full-service CPA firm headquartered in Chapel Hill, North Carolina and is actively involved in auditing, taxation, management consulting, financial planning, and related services. The firm directs a large part of its services toward providing management with advice on budgeting, forecasts, projections, financing decisions, financial analysis, and tax developments. The firm also performs review and compilation services and prepares not-for-profit, corporate, individual, estate, retirement plan, and trust tax returns as well as technology consulting services regarding installation and training on QuickBooks. Blackman & Sloop provides services in Raleigh, Durham, Chapel Hill, RTP, Hillsborough, Pittsboro, Charlotte, and the rest of North Carolina. To find out more please visit http://www.blackmansloop.com
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