If your business spends $600 or more for services from other businesses or from individual independent contractors during the year, you may have to file Form 1099. The requirement to file Form 1099 applies to all businesses. Form 1099 is typically issued to unincorporated businesses.
Form 1099 is given to independent contractors as a record of the income that they received from your business. The most common types of transactions that you must issue a 1099 include:
- Professional fees paid to an attorneys, doctors, or other professionals
- Payments of $600 or more in payment for the use of rental office space, machines, equipment or land
- Payments of $600 or more to physicians, providers of medical or health services, or other medical supplier. The 1099s for medical payments are required for all entities including corporations.
If you own your own business, you are required to send 1099s to qualifying subcontractors. Failing to issue the 1099s to the subcontractors and filing the 1099s with the IRS results in severe penalties.
In an effort to reduce and close the "Tax Gap," the IRS has added two questions to all business tax returns. These questions are worded and designed to determine if any payments during the year would require Form 1099 and if they had actually been filed.
Contact our office if you have questions regarding subcontractors and if Form 1099 needs to be issued.