Business owners can often feel intimidated by tax forms and the 1099 form is no exception. Often, business owners are left puzzled as to the changes to the rules and regulations, so they tend to not bother filing them. As this can lead to a lot of costly penalties, it can be a serious problem for entrepreneurs.
However, things are not quite as complicated as they may seem. It is easy to see how all the guidelines may be a bit overwhelming, intimidating and even off-putting. Continue reading to gain a basic understanding of the 1099.
Who Must Be Issued a 1099 Tax Form?
- The general rule of thumb for the Form 1099-MISC is that must be issued to whomever has been paid at least $600 by the employer. This includes awards, prizes, materials, parts and other forms of payment.
- 1099s do not have to be issued for those payments that were made by the employer for personal reasons.
- Employers are required to issue a 1099-MISC report for those payments that are made for business purposes only.
- The forms must be sent to any partnership, LLC (Limited Liability Company), Limited Partnership or Estate and any individual that meets the above requirements.
What Are the Penalties For Failing to Send Out or File 1099s
- If an employer should fail to adhere to any of the above guidelines, they could face a fine of anywhere from $30-100 per 1099 form, with a maximum of $1.5 million for the entire year. This is also dependent on how far past the deadline the forms have been issued by the company.
- Those businesses that intentionally do not provide the form are subject to a minimum fine of $250 for each form, with no limitation as above.
Are There Any Exceptions?
There are actually quite a few exceptions. The most common of these being that employees are not required to issue the form to rent payments for real estate agents/property managers or corporations. However, they must issue a form to the property owners themselves. As well, 1099s do not have to be issued to those who sell freight, storage, merchandise of other such items.
Lawyers must be sent a 1099 if the business has paid them over $600.