Who Needs to File a 1099?
If you're a business owner and have paid out any miscellaneous income to someone who is not W2'd, then you will need to file a 1099 and report it to the Internal Revenue Service. This form should be filed when paying out more than $600 for awards or prizes, non-employees incomes and rents. There are separate 1099 forms for different categories, so be cautious when filling one out. Failure to fill the correct one our or not sending one at all may cause problems in the future with the IRS.
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Mail 1099 Before Due Date
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You or your tax preparer must send a 1099 to the contracted worker by Jan. 31. It also must be filed with the IRS and the Social Security Administration by the end of February. You will need the worker's Social Security number or Employee Identification Number. You may request this by sending the contracted worker a W9.
Other 1099 Requirements
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File a 1099 when paying contracted or freelance workers medical and health care payments, crop insurance proceeds, commissions and cash payments for fish purchased from anyone engaged in the fishing trade. This form is also required for gross proceeds paid to a lawyer.
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Personal Payments
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1099's are not required for personal payments to an individual.
Avoid Penalties
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Failure to issue a 1099 by Jan. 31st may cause problems. Your tax preparer should be able to file these for you before the due date. Because there are different 1099 forms, it's also important to file the correct one to save time and avoid penalties from the IRS.
New Rules for 2012
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Starting in 2012, if your business pays a corporation $600 or more in a calendar year, you will probably have to report the total on a 1099. Payments to corporations that are tax-exempt organizations will be exempt from this new requirement. Also, your business must obtain a Taxpayer Identification Number from each affected payee, and finally payments of $600 or more in "gross proceeds" to any payee must be reported, even if it is a large retailer.
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References
Resources
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