1099 Requirements

1099 requirements went on a roller coaster ride in 2010 and 2011. The requirements became more strict until the 2010 legislation was repealed in April, 2011. Now, we're back to pre-2010 1099 requirements. Here, we'll shed some light on what the IRS expects from businesses. 

A 1099 form is an information return as opposed to a tax return. Businesses are required to use a 1099 form to report payouts to nonemployee independent contractors and vendors if the payouts are in excess of $600 during the year. Each transaction must have its own 1099 form. Three copies of each form is also a requirement so that the contractor, the payer and the IRS each get a copy. 

One example of a transaction that requires a 1099 form is payment to a lawyer in excess of $600. Payments to corporations that are not law firms and to landlords are exempt from the reporting requirement. However, you are required to report rent paid to a noncorporate landlord for business purposes, like in the case of a farmer leasing land to grow crops. Small time landlords are also exempt from the 1099 requirements when they pay plumbers to fix a tenant's sink for example. A 2010 law required landlords to report payouts, but this requirement was repealed in 2011. 

Some companies fill out thousands of 1099 forms each year. Book publishers who pay monthly royalties and websites who pay independent freelance writers are prime examples of this. In such cases, they are required send the forms electronically to the IRS.