Form 1099: Why It’s Important and What You Need to Know

A 1099 Form is used to report various types of income other than wages, salaries and tips to the IRS for taxation purposes. A 1099 must be issued for most non-incorporated vendors that are paid $600 or more for services rendered in one calendar year. All disbursements issued to attorneys, regardless of amount, must be reported on Form 1099. If employees are reimbursed for their expenses and company policy does not require receipts be submitted, a 1099 must be issued as long as the total reimbursement for the year exceeds $600.

The corporate exemption from 1099 reporting was previously eliminated; however, it was reinstated by the Comprehensive 1099 Taxpayer Protection and Replacement of Exchange Subsidy Overpayments Act of 2011. Other groups exempt from 1099 reporting are governments, not for profits, colleges/universities and churches.

1099’s are due to the recipient by January 31 and must be received by the IRS no later than February 28. It is recommended that they are submitted to the IRS as close to the due date as possible in case any changes occur. As of January 1, 2012 penalties for failing to submit 1099’s on time has broadened. Below is a table of the old vs. new penalties.

For additional information on Form 1099, please visit » www.irs.gov.