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2004 FORMS 1099
January
10, 2005
INFORMATION RETURNS - FORMS
1099
January is the time for
preparing information returns required by the IRS. Discussed below are some
important aspects of the filing requirements for these informational 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. Other Forms and reporting requirements not discussed in
detail include:
Form 1099-B - Proceeds From
Broker and Barter Exchange Transactions
Form 1099-C - Cancellation
of Debt
Form 1099-DIV - Dividends
and Distributions
Form 1099-S - Proceeds From
Real Estate Transactions
Form 8300 - Cash Received
Over $10,000
These forms are rarely
required to be filed in normal business activities.
Who Must File?
All businesses,
whether a sole proprietorship, partnership or corporation, who make any
"reportable" payments.
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:
1. Rents
(building, property, etc.)
Box 1
2. Royalties
Box 2
3. Other income
Box 3
4. Medical and
health care payments. Payments made under a flexible spending arrangement or a
health reimbursement arrangement which is treated as employer-provided coverage
under an accident or health plan are excluded.
Box 6
5. 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. 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?
Form 1099 reporting is
required for most payees 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
2004 should be provided to the qualifying recipient by January 31, 2005, and
most importantly, mailed to the Internal Revenue Service (with Form 1096) by
February 28, 2005.
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 during an audit it cannot be proven that
a form was filed with the IRS, the related deduction can be disallowed for
Oregon purposes and penalties will be assessed.
GENERAL REQUIREMENTS FOR ALL
FORMS
Magnetic Media
If you file 250 or more forms
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 28 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.
The information included in
this newsletter is intended to provide a general overview 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 Matt or
Lou at our
office.
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