How To Know When To Issue A 1099-MISC
So, it is January, and you need to know when to issue a Form 1099-MISC? This is a question that plagues many. There is ample reason to be concerned, as the penalties for not filing a Form 1099-MISC when it is required can be quite steep. There is a penalty of $50 for the failure to file the Form 1099-MISC with the IRS, and $50 for the failure to furnish the form to the payee. The penalty applies to each occurrence, so you can imagine how these amounts can add up.
It is important to remember that, even if you do not own a business, you can still be liable for filing Forms 1099-MISC. In order to keep yourself out of trouble with the government, there are a few rules to remember so that you will know when to issue that Form 1099-MISC.
- Check your records for the year. Dig out that box, bag, or folder of receipts, and try to determine if you paid anyone more than $600 during the calendar year. If so, you may need to issue that payee a Form 1099-MISC. If not, you can relax and put those records away until April 15.
- Determine the purpose of the payment. A Form 1099-MISC does not need to be filed for the purchase of goods, but only for payment for services or rent. This could include things such as yard work, odd jobs, rents, and other various services. If this applies to you, keep reading. If not, put those records away, make yourself a cocktail, and relax! You are in the clear.
- Determine the status of the payee. In general, a Form 1099-MISC is only required to be issued to a payee who is an individual or an unincorporated business. If the payee qualifies, you must secure a valid Social Security number or tax ID number, as well as a valid address. This may be a challenge, as many people who are self-employed prefer to remain anonymous in the eyes of the IRS.
If you are required to file forms 1099-MISC, there are certain procedures you must follow. Forms 1099 must be furnished to the payee by January 31. They must be filed with the IRS by February 28 if filed on paper, or March 31 if filed electronically. Be sure to check the IRS website at www.irs.gov for filing addresses, which are based on your location.
So, now that you know the quick and fast rules regarding when you should file a Form 1099-MISC, you can relax! Either get to work filing those forms, or kick back and have another cocktail!