INFORMATION RETURNS - FORMS
1099 AND 8300
January 4, 2002
January is the time for preparing information
returns required by the IRS. The rules for filing these forms have been
established for several years, but lately the IRS has become more adamant that
they be followed exactly. Discussed below are some important aspects of the
filing requirements for these returns. These requirements apply to payments
made in the course of a trade or business only. Personal payments are not
reportable.
FORM 1099 - PAYMENTS
MADE
There are many types of 1099s. Our discussion
is limited to the key requirements for filing Form 1099‑MISC and Form 1099-INT.
The IRS instructions should be consulted for information on the other, less
common 1099 forms.
Who Must File?
FEDERAL
– All businesses, whether a sole proprietorship, partnership or
corporation, who make any reportable payments.
OREGON
– Most payers are no longer required to file information returns for the state;
however, the following exceptions exist:
-
Interest income of $10 or more that is nontaxable under
federal law but taxable by Oregon.
-
Income attributable to an Oregon Source, but issued to a taxpayer with an
address outside Oregon.
Which Form Should Be Filed?
Form 1099-MISC is used for any reportable payment of $600 or more per calendar
year which is not reportable on any other 1099 form. Reportable payments, and
the location on the 1099 where they are to be reported, are as follows:
-
Rents (building, property, etc.) Box 1
-
Royalties Box 2
-
Other income Box 3
-
Medical and health care payments Box 6
-
Non-employee compensation including fees and commissions for services
(including parts and materials). Non-employees include: independent
contractors, contracted services, outside consultants, (attorneys, accountants,
janitors, etc.) Box 7
NOTE:
All payments to attorneys, even if the
attorney is incorporated, must be reported on Form 1099-MISC.
Caution: Be sure to report 1099-MISC payments in the proper box because the IRS
uses this information to determine whether the recipient has properly reported
the payments on their tax return. Any differences will generate an inquiry from
the IRS. Boxes 1 and 7 are the most frequently used boxes. Amounts in box 7
are generally subject to self-employment tax. If payments are not subject to
self-employment tax, and they are not reportable elsewhere, report the payments
in box 3.
Form 1099-INT is to be used for any reportable payment of interest of
$600 or more ($10 if you are in the business of lending, i.e., banks) per
calendar year. Interest paid on an obligation issued by an individual is not
required to be reported on this form. In addition, interest paid to certain
payees, including corporations, tax-exempt organizations and IRAs, is not
reportable.
Does It Matter Who The Payee Is?
Most payees qualify with the key exception
of corporations (departures from this exception include payments required
to be reported in box 6 and payments to attorneys). If the payee is a
sole proprietorship or partnership, a Form 1099 must be filed; however, if the
payee is a corporation a 1099 may be issued, but is not required.
NOTE: The IRS has been returning 1099s where
the recipient's (payee’s) name and the corresponding taxpayer identification
number do not match. Be careful to ensure that the name on the first line in
the recipient's name box and the recipient’s tax identification number are both
correct before filing the form. If the name and number do not match, the IRS may
send the form back and require backup withholding on future payments.
When Must They Be Filed?
Form 1099 for calendar year 2001 should be
provided to the qualifying recipient by January 31, 2002 and, most
importantly, mailed to the Internal Revenue Service (with Form 1096) by
February 28, 2002. Oregon returns (with Form 96) have the same due dates.
What Are The Penalties?
Federal - The penalty for not filing any of
these forms varies from $15 to $50 per form.
Oregon - If a Form 1099 is required to be filed
with the IRS, and on audit it cannot be proven that such form was filed with the
IRS, the related deduction can be disallowed for Oregon purposes and penalties
will be assessed.
FORM 8300 - CASH RECEIVED OVER $10,000
If you receive, in the course of a trade or
business, more than $10,000 in cash (or cash equivalents) in one transaction, or
in more than one related transaction, you must report the transaction to the IRS
on the Form 8300 - Report of Cash Payments over $10,000 Received in a Trade or
Business. Please be aware that the IRS is aggressively checking the compliance
with these reporting requirements. If you are in this situation, consult the
instructions to Form 8300, or call us for more details.
GENERAL REQUIREMENTS FOR ALL FORMS
Magnetic Media
You may file up to 250 forms before you must
transmit the information via Magnetic Media. The 250-or-more requirement applies
separately to each type of form.
What Happens If Payee Will Not Supply An Identification Number?
You need to include the recipient's taxpayer
identification number on the Form 1099. You can use IRS Form W-9 to request the
recipient's identification number. If the payee will not give you an
identification number, you are required to withhold 31 percent of all future
payments and remit the withheld amount to the Internal Revenue Service. The
payee is subject to a potential penalty of $50.
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The
information included in this newsletter is intended to provide a general
over-view of the basic filing requirements for these forms. There are
additional filing requirements and special exceptions which have not been noted
above. If you would like additional information about filing these or other
information returns, consult the specific form instructions provided by the IRS
or call our office at (503) 244-2134.
