All businesses make payments to vendors. But are you required to report these payments to the IRS? It depends on who you are making payments to and the amount being paid during the year.
Various types of Forms 1099 must be provided to certain type of payees by January 31, and, new for 2017, to the IRS also by January 31. Here’s a rundown of some of the more common payments that may require an information return.
• Payments of $600 or more to contractors or other services providers (other than corporations) must be reported to the recipient and to the IRS on Form 1099-MISC.
• Payments to attorneys for business-related services must be reported to the attorney and to the IRS. These payments must be reported on Form 1099-MISC regardless of the amount and regardless of whether the attorney is incorporated or not.
• Rents totaling more than $600 paid to an individual landlord, partnership, or estate (but not rents paid to a corporation) must be reported on Form 1099-MISC. (However, rents paid to a real estate agent are generally not required to be reported.)
These forms must be mailed to the recipient by January 31 and are due to the IRS at the same time.
If you made payments to the vendors via credit card charges, you do not have to include these payments as they will already be picked up by 1099-K through merchant services.
Bear in mind that the penalties for failure to comply with these information-reporting requirements can be stiff. The IRS has also increased penalties for failure to file Form 1099; it is now a total of $520 per Form 1099 for not meeting this requirement. These new questions and the increased penalties are evidence that the IRS is trying to find businesses that are not filing Form 1099. It is more important than ever that this filing requirement is not overlooked.
Donna Bordeaux, CPA with Calculated Moves
Creativity and CPAs don’t generally go together. Most people think of CPAs as nerdy accountants who can’t talk with people. Well, it’s time to break that stereotype. Lively, friendly, and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna and Chad Bordeaux. They have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.