Does your business have to send out Form 1099MISC?

Most businesses do.  It doesn't matter whether your business is a sole-proprietorship, partnership, corporation or LLC, you may have a 1099 filing requirement with the IRS.

This  requirement  in addition to filing your income tax return every year.

The basic rules are that if you pay $600 or more during any year for services or rent, you may have to send the recipient (person you paid) an IRS Form1099-MISC.  The most common types of services that require 1099s are professional services (e.g., legal, accounting, tax preparation), repairs and maintenance (painters, plumbers, electricians, landscaping, pool service,  etc) and rent for office space.  

Payments to corporations are excluded...except payments to lawyers which still have to be reported they are incorporated or not.  Also purchases of goods (eg, supplies or products for sale) are not included as they are not services.    

The amounts are reported both to the recipient  and the IRS, with the recipient's copy being due by Jan 31 of the following year.
Failing to do so may result in penalties.

To send a 1099 you should ask the recipient  to fill out a Form W-9, blank copy attached below.   On this form, they will give you their name, address and either social security number or Federal Employer ID number.  They would then return this form to you (not send it to the IRS).   You would use the information to prepare the 1099s.  

Note regarding rental property:  There was a requirement that rental property owners send 1099s starting with tax year 2011.  However, this requirement has been repealed so 1099s are not required to be sent.

If you need help or have questions, please feel free to contact me.   Also if you would like for us to prepare and send the 1099s for you, please let me know and we will be glad to do that also.  It is not very expensive to do this and you don't want to take a chance on being penalized for failing to file all the required tax forms.

Example: You own a small hotel and pay $150 per month for pool service and  $200 per month to the gardner.  Neither is incorporated.     In this case a 1099MISC must be issued to both of them.  The payments are for services and exceed $600 during the year.   You also spend $1500 during the year on cleaning supplies and $1200 for a new computer.  1099s are not required as these are not payments for services.  Assume the hotel owner also pays the gardener $85 per month for work at his/her house.  This payment does not have to be reported as it was not made in connection with the business.

Note: The above is provided as general tax information and can not  be considered advice as to specific situations as each case is different.