Certain payments made to contractors and non-employees, in the course of your business or trade during the previous calendar year need to be reported to the Internal Revenue Service (IRS) in Form 1099-Misc - Miscellaneous.
This filing requirement is also applicable to non-profit organizations, trusts, qualified pension and profit sharing plans and 501(c) or (d) organizations. Federal, state and local government agencies making such payments are also liable to file this Form 1099-Misc.
Payees/recipients will include the following categories:
- Anyone receiving fees, payments towards royalties or brokerage in lieu of dividends or tax-exempt interest (US$10 and above).
- Anyone receiving monies towards rents, services rendered (including for parts and materials).
- Those receiving -
- (i) Prizes and awards
- (ii) Medical and health care
- (iii) Non-employee compensation
- (iv) Crop insurance proceeds
- (v) Cash payments for fish and other aquatic life
- (vi) Fishing boat proceeds
- (vii) Payments to attorneys
- The amount of payment is US $600 and above.
- This form should also be submitted when direct sales of consumer products exceeding US$5,000 is made for resale in anywhere other than a permanent retail establishment.
The following important points should be noted while preparing Form 1099-MISC -
- This filing applies only for transactions in course of business or trade.
- If the payments are personal and not made for a gain or profit, then it need not be reported on this form.
- Check to see the due date for filing the Form 1099 (for 2009, the due date was February 15).
- Check General Instructions Product for 2009 for specific instructions.
- The IRS does not accept forms printed from its website since they do not enable scanning.
- For paper copies of forms visit http://www.irs.gov/ or call 1-800-829-3676.
- Complete the Form 1099-Misc in all respects.
- Mandatory information includes your Employer Identification Number, business name and business address.
- You can use the Social Security Number of the recipient for his identification.
- File Copy ‘A' with the IRS by March 1, 2010.
- Provide Copy ‘B' of the Form 1099 Misc to the recipient of payment.
- Preserve Copy ‘C' for your records.
- If there are State taxes applicable to your transaction, then submit Copy 1 to the State tax department.
- Hand over Copy 2 to the recipient for filing along with his/her tax returns.
- The paper copy of this form is self-inked and it produces a carbon copy automatically.
- Remember to write with a firm hand and apply some pressure, this will ensure every carbon copy is reproduced legibly.
- While filing in paper format, use a Form 1096 - Annual Summary and Transmittal of U.S. Information Returns to aggregate and submit all the Forms 1099.
- Form 1096 acts as a covering letter for various forms.
- Select only those check-boxes that are relevant to you.
- A separate Form 1096 should be submitted for each and every transaction.
- Those being assessed for tax have the option of electronic filing until March 31, 2010 provided the filing is done through generation of forms through specific software, recommended for this purpose.
- The IRS has established a customer service toll free number 1-866-455-7438 in case you have questions relating to filing the Form 1099 Misc.
- You can also reach them on 304-263-8700, but this is not toll free.
It is best advised to check with an attorney or tax advisor in case of difficulty in filing a Form 1099 Misc. Else, contact the IRS help lines. This information is sufficient for your knowledge, in case you've been wondering how to prepare a 1099-Misc form.