Anyone who is actively engaged in the business of leasing, renting, and managing real estate is required to provide 1099 forms. The most commonly used version of the 1099 form is the 1099-MISC.
What is the 1099-MISC?
The 1099-MISC is an Internal Revenue Service (IRS) form categorized as an “information report” that businesses must provide to non-employees who have earned at least $600 in compensation from that business that tax year.
Who receives the 1099 form?
Businesses must provide this tax form to independent contractors, freelancers, and sole-proprietors. Trades this can include are carpenters, landscapers, web designers and others like them. No employer should be providing one of their own employees with a 1099 form. Employees of a business should be receiving W-2 forms instead.Businesses should also be filing 1099 forms with the IRS.
What payments should be reported on a 1099 form?
The amount reported on a 1099-MISC should not include personal payments, it only entails business-related transactions. Vendors that are incorporated (Inc.) do not require a 1099 form. Money paid for retail merchandise, freight, and storage should not be included on a 1099 form.
What information is required on a 1099 form?
The form must include the funds your business has paid and the recipient’s address. The 1099 form must also include a Tax ID Number (TIN) for the recipient of the 1099. The two main identification numbers that can be used as a Tax ID Number is their Social Security Number (SSN) or their Employee Identification Number (EIN) which can also be referred to as a federal tax identification number.
How do you file your 1099?
You can file your 1099s electronically or by mail. If you are filing your 1099 forms by mail you must also file a 1096 form. If a business is filing more 250 of the 1099 forms, they must submit them electronically. The 1096 form is not required if you are filing your 1099 forms online.
Are there any other associated forms?
As mentioned above, the 1096 form is used in conjunction with information reports like the 1099 forms when it’s being filed by mail. The purpose of a 1096 form is to summarize the total information reported on all the 1099 forms that you are filing.
You may also consider using a W-9 form. A W-9 form is a formal request for a taxpayer’s identification number and certification that companies often use to get tax information at the start of their work relationship with vendors and contractors. Having that information on file at the start of the relationship prepares businesses for taxes by eliminating the need to search for this information.
Why do you need to file 1099s?
The IRS uses the 1099 form to monitor nontraditional sources of income. The 1099 form is a way to capture income information that could otherwise go unreported. Not filing 1099 forms, filing late, or filing incorrectly can lead to large monetary penalties from the IRS.