Are you obligated to file a Form 1099-?MISC?

If you paid anyone $600 or more during 2014, your business may need to issue forms 1099-MISC to people and businesses you paid. This memo explains the requirements to you. The memo also outlines how to engage our firm to prepare the forms for you.

When you must issue a 1099-MISC:
The Internal Revenue Service requires you to report certain payments you make as part of your business (including rental property ownership) to the Internal Revenue Service and to the payee.

If the following four conditions are met, you must generally report a payment as non-employee compensation.

  • You made the payment to someone who is not your employee (you don’t issue a form W-2);
  • You made the payment for services or rent in the course of your trade or business (including government agencies and nonprofit organizations);
  • You made the payment to an individual, partnership, LLC, estate, or, in some cases, a corporation; and
  • You made total payments to the payee of at least $600 during the year.”

What should you include on Form 1099?
Generally you do not have to issue a Form 1099-MISC for non-employee compensation paid to a corporation. Payments to corporations are reported only if they are for medical, veterinary, health care, legal or fishing activities.

EXAMPLE: If a business paid a self-employed photographer, Smith Photography, an unincorporated sole proprietor who files a Schedule C, $750.00 for taking publicity photos or photos used in a catalog, it would have to issue a Form 1099-MISC to Smith Photography. If the photographer was Wilson
Photography, Inc. no Form 1099 would be required.You must include the payee’s Social Security Number or Employer Identification Number and legal address on the Form 1099. If you do not have this information, have the payee complete Form W-9 and return it to you. You don’t need the original Form W-9; a copy is acceptable. Our office recommends that you obtain a completed Form W-9 from any new contractor BEFORE you issue any payments to them.

Non-Resident Aliens
1. A 1099-MISC is always issued to a U.S. person (Citizen, green card holder, or resident) no matter where they live, where they performed the work, or where you sent the payment.

2. If a non-resident alien performs services for you outside of the US and the alien does not come to the US to perform the services, then no 1099-MISC is required to be filed. Be sure to retain adequate documentation to prove no work was done in the U.S. Note that if the payee has a US bank account or US address, you should request form W-8 from the payee.

3. If a non-resident alien performs services in the U.S., they must complete Form W-8 or Form W-9. Again, we recommend you not make any payments before you possess these documents.
             A. If they complete Form W-9 they are indicating they                     are a US resident and a 1099-MISC is issued.
             B. If they complete Form W-8 for services performed                    in the U.S., they are indicating they are a non-US                      resident, and not a Green Card Holder or Citizen.                      Withholding tax almost always must be withheld, at                    a rate of 30%. Sometimes a lower “treaty rate”                          can apply. Withholding is not optional, and the IRS                    will hold you responsible for the failure to withhold.
             C. Note that it does not matter where you paid the                        person – it matters where they worked. Paying a                        German Citizen via wire into their European                              bank account for services performed in the U.S.                        must be reported to the U.S.

Having Gallati Professional Services prepare the forms:
We are able to prepare forms 1099-MISC for you and file them
electronically. There is an additional charge separate from your income tax
preparation for this service. In order to complete these forms:

Please provide us with a list of those contractors you need to issue a for to. We require:
            – Name as it appears on the payments you made
            – Address of payee
            – Social security number or employer identification                       number of payee
            – Amount you paid them during 2014

  1. Please provide us with the information no later than January 17th.
  2. We complete 1099 projects in order received.
  3. If the package of data you send to us isn’t complete, we reserve the right to not begin work until the full package is received
  4. For information received after 5 pm on January 26, we might not meet the February 2, 2015 deadline to distribute 1099 copies to your recipients. (We will meet the February 28 deadline to submit copies to the IRS)
  5. For information sent after January 31, we may not be able to accommodate you at all.

If you have any questions or concerns, please contact Gallati Professional Services at (585) 445-7285 or  

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