Chances are you will be required to report payments on a 1099-MISC.
What you may not know is the who, what, when, where, and why?
The Who and What...
A form 1099-MISC must be given to any person you paid a minimum of $600 to for rent, services, prizes, awards, medical or health care payments, etc. This does not include employees whose reporting's appear on form W-2.
For example: You pay a cleaning company to perform weekly cleaning task on company property. You must report all payments made to that company, during the given year, on a Form 1099-MISC.
You must also report the following:
* A minimum of $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
* Any fishing boat proceeds.
* Gross proceeds of $600 or more paid to an attorney.
The When and Why....
1099-MISC forms must be sent out around the same time you send out W-2 forms. The reason for this is, individuals and companies will need this documentation in order to properly file their Income Tax Returns. You will also need this information for your own tax records.
It is extremely important to make sure this can properly be done. In order to do that, I would advise you submit, and demand the return of Form W-9, Request for Taxpayer Identification Number, before making any payments.
Failure to obtain this request may result in you being held liable for applicable taxes.
The Where...
Form 1099-MISC is structured similar to form W-2. Sections are clearly labeled/numbered, indicating what types of payments should be reported in each box. There is also boxes for any state taxes that may have been withheld. You will want to set up your accounting software to appropriately track these vendors, and amounts.
For complete instructions please visit IRS.gov.
