(MoneyWatch) With more folks being self-employed, and paying for the services they need to run their businesses, it's become important for these individuals to know IRS rules and requirements for issuing 1099-Misc forms.
If during the calendar year you hired contractors in the course of running your trade or business, you may have to issue them a 1099-Misc. The IRS makes this requirement so that you remind folks you pay to include such payments on their tax returns. Additionally you would need to furnish the IRS with a copy of the 1099-Misc.
The current rules are:
- Payments to any one contractor of $600 or more during the tax year in the course of your trade or business. The contractor must be an individual or partnership; payments to corporations currently do not require a 1099, except for noted below.
- Professional fees to an attorney, doctor or other professional are included, as long as they are made in the course of your trade or business. Do not issue a 1099 for payments that are for personal expenses.
- Payments to corporations are included only if they are for medical, health care, legal or fishing activities (yes, fishing!).
Payment of $600 or more in rent for office space, machines, equipment or land in the course of your trade or business will also require a 1099-Misc if the payment was made to an individual or partnership, not a corporation.
Payments include commissions, fees, interest, rents, royalties, annuities and any other type of compensation or income to a single recipient.
There are a few additional requirements to keep in mind:
- The IRS deadline for mailing 1099 forms in respect to payments made in 2012 to your recipients is Jan. 31, 2013.
- If you inadvertently fail to issue a proper Form 1099, the IRS can assess a $50 penalty. The penalty for each intentional failure can be $100 or more.
It's important to note that individuals are not required to send 1099-MISC for personal payments. Individuals are not required to send a 1099-MISC to an independent contractor to whom you have made a personal payment unrelated to your trade or business. So you don't have to issue a 1099-MISC to your landscaper or house painter....not yet anyway.