How to Prepare Form 1099 for Informal Investment Clubs
If you are running an informal investment club and you paid out $600 or more of income to any individual as part of the function of that club, you must send that person a 1099. A 1099 is a tax form used to report miscellaneous payments and income, including investment income. You only must send a 1099 to those who you (or the club) personally paid money to. If someone in the club made money on an investment that he made through the club, the 1099 investment income form will come from whomever or whatever he invested in.
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Instructions
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Obtain the social security numbers and addresses of anyone in the club who you paid over $600 to. You can obtain this information by requesting club members fill out a W9 form available from the IRS website. The information is necessary so you can send out your 1099's.
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Request original copies of 1099 forms from the IRS website or via phone at 1-800-829-3676. You cannot print copies of the form from the website as you have to have an original, scannable form. Order a packet of forms (which contains your copy, the IRS' copy and 2 copies for the person receiving the form) for free for each individual you need to send a 1099 to. You can also purchase the forms at local office supply stores.
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Complete the 1099 form. You will need to input the tax ID of the person/club who paid out the money. If the investment club is a separate legal entity and has an employer ID number (EIN) or corporate ID number, include that as the tax payer ID. Otherwise, you can list the person social security number of whomever made the payments on the 1099. You will also need to include all income that you paid out to the member's of the club under miscellaneous income in the appropriate box (box 3) on the 1099 form.
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Mail copies to the individuals you are sending the 1099's to and to the IRS. The copies must be mailed to members of the club by the end of January or early February (the exact deadline varies on a yearly basis) and copies must be submitted to the IRS by the end of March.
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