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When is it your job to send out 1099 tax forms?

Tax refunds may be delayed due to shutdown

If you've earned interest on a bank account or money market fund, or received dividends from stocks or mutual funds, the bank or brokerage firm that holds your money must send you a form 1099-INT (for interest income), 1099-DIV (for dividend income) or 1099-B (for proceeds from the sale of investments). If all goes as planned, you should receive your 1099 by early February because banks and other financial firms must mail them by Jan. 31 or make them available to you electronically (if that's your preference) by Feb. 1.  

But those aren't the only kinds of 1099 forms. There's also the 1099-MISC. If you're among the millions of taxpayers who owns a business or is self-employed, and you've made payments for the services you need to run your business, you may be required to send out a 1099-MISC. If you're in that group, it's important to know the rules and requirements for sending 1099 forms.

The IRS makes this a requirement so that you remind those you've paid for services to include those payments on their tax returns. Additionally, you're required to file with the IRS a copy of any 1099-MISC forms that you send out.

Here's what you need to know:

  • You must send a 1099 when you've made payments to a 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 don't require a 1099, except as noted below.
  • Payments you've made to an attorney, doctor or other professional should also be reported, if the payments are made in the course of your trade or business rather than for personal use.
  • Send a 1099 for payments to corporations only if the payments are for medical, health care, legal or fishing activities.
  • 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 if the payment was made to an individual or partnership. There's no requirement to send one for rent payments to a corporation.
  • You must also furnish a 1099 to recipients of payments you made that include commissions, fees, interest, rents, royalties, annuities and any other type of compensation or income.

Here are a few additional requirements to keep in mind:

The information you must include on the 1099 includes the recipient's name, address, tax ID number (or SSN) and the amount of the payment. Because of this, most businesses require a completed W-9 form from any vendor or contractor they expect to pay more than $600 before the payment is made.

The IRS deadline for mailing 1099 forms for 2018 payments is Jan. 31. You don't want to overlook this requirement. If you fail to issue a required 1099, the IRS can assess penalties. For individuals, they can range from $30 to $100 per form. For businesses, it's a penalty of up to $250 per form, with a maximum total of $1.5 million.

Finally, you don't have to send 1099s for personal payments unrelated to your trade or business, such as to your landscaper, house painter, babysitter and so on.