Discussion:1099-Misc

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Matt1099 (talk|edits) said:

13 January 2006
As a business that has to issue 1099-Misc. forms, I'm confused regarding the instructions to report in box 7 payments for services. Does this mean a company (not a corp.) that does landscaping or repairs something at my business gets a 1099? Or is it only for individuals? I'm looking for better examples of who to give a 1099-misc to.

PGattoCPA (talk|edits) said:

13 January 2006
Your understanding of the services issue is correct, so it seems that you are not sure about what types of entities a 1099-MISC should be issued to in the course of your business.

1099-MISCs are issued to individuals, estates, partnerships, disregarded single-member LLCs and LLCs treated as partnerships.


Corporations and LLCs treated as an association and taxed as a corporation are generally not issued 1099-MISCs UNLESS the payments are:

1) for medical and health care (box 6);

2) for fish purchases paid by cash (box 7);

3) for attorney fees (box 7);

4) gross proceeds paid to an attorney (box 14);

5) in lieu of dividends or tax-exempt interest (box 8);

6) by a federal executive agency for services (box 7)


Source for the list above: Instructions for Form 1099-MISC (Revised November 2005), page MISC-2

LJACPA (talk|edits) said:

13 January 2006
Are you sure an LLC treated as a partnership is required to get a 1099? It's always been my understanding that this is not required.

PGattoCPA (talk|edits) said:

13 January 2006
I believe the thrust is that if the LLC is treated as a flow-through entity (either disregarded (Sch C) or as a partnership (K-1)) it should receive a 1099 because the money will be an item of income to the members / partners. LLCs are not among the exceptions listed in Regulations §1.6041-3(p).


BEGIN CITE

1.6041-3 Payments for which no return of information is required under section 6041

(p) Payments made to the following persons:

(1) A corporation described in §1.6049-4(c)(1)(ii)(A), except a corporation engaged in providing medical and health care services or engaged in the billing and collecting of payments in respect to the providing of medical and health care services. However, no reporting is required where payment is made to a hospital or extended care facility described in section 501(c)(3) which is exempt from taxation under section 501(a) or to a hospital or extended care facility owned and operated by the United States, a State, the District of Columbia, a possession of the United States, or a political subdivision, agency or instrumentality of any of the foregoing. For reporting requirements as to payments by cooperatives, and to certain other payments, see sections 6042, 6044, and 6049 and the regulations thereunder in this part.

(2) An organization exempt from taxation under section 501(a), as described in §1.6049-4(c)(1)(ii)(B)(1), or an individual retirement plan, as described in §1.6049-4(c)(1)(ii)(C).

(3) The United States, as described in section 1.6049-4(c)(1)(ii)(D).

(4) A State, the District of Columbia, a possession of the United States, or any political subdivision of any of the foregoing, as described in §1.6049-4(c)(1)(ii)(E).

(5) A foreign government or political subdivision of a foreign government, as described in §1.6049-4(c)(1)(ii)(F).

(6) An international organization, as described in §1.6049-4(c)(1)(ii)(G).

(7) A foreign central bank of issue, as described in §1.6049-4(c)(1)(ii)(H) and the Bank for International Settlements.

(8) Any wholly owned agency or instrumentality of any person described in paragraph (q)(2) [sic (p)(2)], (3), (4), (5), (6), or (7) of this section.

END CITE

Ensen (talk|edits) said:

14 January 2006
So are you required to 1099 a law corporation?

LJACPA (talk|edits) said:

14 January 2006
I'm sorry, PGatto did say that LLCs treated as Pships do receive a 1099; I agree. And, yes, from instructions for 1099-MISC, page 2, payments to attorneys, reported in either Box 7 or Box 14, are reported on 1099 even if incorporated.


LJACPA (talk|edits) said:

14 February 2007
I just recently posted a question about a 1099 that was issued to my client that reported the January 2007 rent payment in the 2006 1099. I even went so (deperately) far to call the IRS and was told that they "constructively received" this amount and would have to report it. I would agree with this IF they were actually due the rent for January before January 1. I don't agree that just because a company pays prior to year-end so they can get the deduction that they can issue a 1099 to include that if it's not due until January 1. Am I wrong? Anyway, I had already prepared and finalized the returns, got the 1099 and redid the entire return based on the 1099. I explained this to my client (before redoing and got no response until it was redone) and now we're waiting for the issuer to issue a corrected 1099 so I can do the returns a third time. Something is not right here. I truly, truly believe that if a 1099 is filed with the IRS that the recipient copies MUST be sent to the recipient. My situation is a case in point.

Glmpllc (talk|edits) said:

14 February 2007
LJA, I think the 1099 is issued correctly. If your client received the payment on or before 12/31, then 2006 income. If received after, then 2007 income.

If it's properly 2007 income because received after 12/31, then maintain a schedule in your workpapers that reconciles the rental income reported to the 1099.

It happens quite often when a homeowner makes a payment just before the end of the year and the 1098 does not reflect the last payment. In this case, I believe you just maintain records reconciling the 1098 to the deduction. Same concept here.

LJACPA (talk|edits) said:

15 February 2007
Client received in January 2007; should I wait for corrected 1099 or just redo now?

TAXi driver (talk|edits) said:

21 December 2007
I'm confused on the 1099s. What if a non employee (individual) is paid 250 for independent contract work, and 400 for a product that they provided for you to reimburse? Do they get a 1099 for the 650 or none?

Death&Taxes (talk|edits) said:

21 December 2007
see the exceptions here http://www.irs.gov/pub/irs-pdf/i1099msc_07.pdf

Pegoo (talk|edits) said:

21 December 2007
1099 for 650 and the contractor will deduct the cost of the 400 on sched C

TAXi driver (talk|edits) said:

21 December 2007
Ref my earlier question, what if they're not in the trade or business of the service they, the individual, provided? In my case, the company is an apartment complex. The person helped organize a party for the complex. He purchased $400 of meat that was reimbursed. Then was paid $250 for his time to organize the party. He's not in the business of organizing parties or providing meat. Would this change matters?

Pegoo (talk|edits) said:

21 December 2007
That does not change matters. The company would want to deduct 650, thus will issue your client a 1099 for services paid 650. Your client then will deduct 400 and report 250 as income. As long as there is reportable income, you'd get a 1099. It just tells the service to expect someone to report that income somewhere.

TAXi driver (talk|edits) said:

21 December 2007
Thanks! I'm the one making out the 1099 for the corp. This is my first client to get me this sort of year end info. I'm a newb! I just wanted to make sure I didn't screw it up.

Pegoo (talk|edits) said:

21 December 2007
There is a $50 penalty for not issue/reporting a 1099 =).

Taxfresno (talk|edits) said:

22 December 2007
that is correct


BillyBoy (talk|edits) said:

16 January 2008
Has anybody found a good definition of "Services". Assume for the sake of argument that the following entities are not incorporated (S or C). Linen services entity, provide mats and clothing for use, including pick up and cleaning. An entity that sells advertising space. An IT professional that builds a server and charges for the server not his time. What about Internet Service Providers, garbage collectors (or, as seen on a resume, sanitation engineers, LOL), mobile paper shredders, etc.

According to the 1099misc directions, exceptions from having to provide a 1099 include, and I quote, "Payments for merchandise, telegrams, telephones, freight storage, and similar items."

That has to be one of the silliest and opened ended definitions I have read in an IRS publication. Never mind the fact that nobody uses telegrams any more, how do you define "and similar products"? Aren't freight storage facilities providing a service.....?

I take a very liberal view on the definition of "and similar items" and base the provision of 1099s mainly on Professional service providers and other similar entities as described on page 6 of the 1099misc instructions, section "When to Report" and "Examples".

Another reason I exclude as much as possible from 1099s is that fact that I hate getting those "matching" notices that the IRS sends when the name and EIN/SSN/TIN don't tie their records. Not a huge issue but can be a bit time consuming if follow up is required.

Also, the audit risk has to be very small for most business.

This has been my approach over the last 15 years as a CPA and has worked well. Does any other service providers agree/disagree?


Bottom Line (talk|edits) said:

19 January 2008
Why is everyone so hesitant to send out a 1099? I agree, I prefer to save the time and postage. However, I'd rather err on the side of sending one than incur a $50 per incident penalty for not sending.

Jrstars (talk|edits) said:

20 January 2008
Do you issue a 1099MISC for pass through items? Hair Salon has multiple chair renters who are treated as independent contractors. There are retail sales that get run through the salons bank accounts which these chair renters receive commission on. Typically when the client purchases retail items, the salon runs the entire charge for hair cut and retail through the salons bank. The salon then reimburses the chair renter for the hair cut portion and their commission. At the end of the year, do I issue a 1099MISC for the entire hair cut and commission on retail? or do I just issue for the commission portion. It would seem to me that the hair cut portion would be an accounts payable item and is not really paid by the salon for services. Anyone have any thoughts on this?

PostingFromWork (talk|edits) said:

20 January 2008
You would issue a 1099 for combined hair cut portion and the retail commision.

I would take a good hard look at if you are correct in treating the stylists as independent contractors.

Bottom Line (talk|edits) said:

20 January 2008
There's an extensive thread on hair salons.


Ken@seamann.com (talk|edits) said:

26 January 2008
Technically, all service providers should be provided a W9 to get their info B4 you issue them a check, or you must withhold the 30%. You have no way of knowing or backup substantiation upon audit w/o the W9 on file.

Individuals normally donot issue 1099s to childcare providers. A company providing as a benefit to their employers would. The taxpayer tattles (provides the information) when they file their tax returns on Form 2441. If in doubt, send the 1099!!! If the taxpayer doesn't send out 1099, it is a violation & something that must be disclosed because it is a material misrepresentation, because non-reported 1099 amts may be disallowed on the tax return.

TxSrv (talk|edits) said:

26 January 2008
No, the deduction cannot be disallowed for failure to issue a 1099. Nor is any "disclosure" on the related income tax return warranted in any case.

Ken@seamann.com (talk|edits) said:

26 January 2008
Actually, in the state of California, it can, & I have seen the IRS do so also & heated discussion on various other websites, in light of the new disclosure rules, strongly suggests otherwise.

Natalie (talk|edits) said:

January 28, 2008
Ken, where does it say that all service providers should be given a W9 before any payments are made to them (or that the business must withhold taxes)? The cost of business is already high enough without suggesting this to clients. Or do you mean all businesses that are not clearly corporations?

TheTinCook (talk|edits) said:

28 January 2008
Natalie, §3406 and the associated regulations require that for reportable transactions (the type of things you'd file a 1099 for) where the payee fails to provide their TIN, that backup withholding must occur.

§31.3406(h)-3 requires the use of Form W-9.

There ain't no exception for corporations. Even if you don't need to send them a 1099.

Natalie (talk|edits) said:

January 28, 2008
I understand if someone is asked for an ID number and they do not provide a number (or provide an incorrect number), backup withholding is required. But if a business has a vendor, let's say it's their tax preparer, and the name of the company is "XYZ Tax Preparation Services, Inc.," is the business required to ask the tax preparer to complete a W9? That's what I understood Ken's post to mean.

Natalie (talk|edits) said:

January 28, 2008
I would take the position that the answer is no, W9s are not required to be issued to all service providers because payments to corporations are not reportable payments in the first place. Am I missing something?


Maxact (talk|edits) said:

21 March 2008
I have a client who received a 1099-misc with nothing but a mark in box nine. I suggested we put together a Sch C for the godos sold. They don't really want to do that. Are there other options for reporting?

DZCPA (talk|edits) said:

22 March 2008
Is their last name Sinatra. " I want it my wayyyy" Options. Fire client.


Waynecpa (talk|edits) said:

2 January 2009
Here we go with 1099 questions again. A client logs trees from a homeowner and pays them. I know a 1099 is required, but they are having problems with getting the homeowner to provide a social security number to them. What is the best way to approach him so they can complete the 1099 as required?

Kevinh5 (talk|edits) said:

2 January 2009
from the front. as in 'up front'.

no SSN, no check.

Pink Pearl (talk|edits) said:

2 January 2009
now that's what I call backup withholding !!!!!!!!!!...lololol

Tonymontana (talk|edits) said:

2 January 2009
The best way is to hand him a W-9 and have him fill it out.

It is a simple "yes, I'll give it to you" or "no, I won't give it to you."

Then if he won't give it up, use Kevins approach.

Rkrcpa1 (talk|edits) said:

2 January 2009
I tell all my clients to get the info before they pay. It's a great incentive.

Tonymontana (talk|edits) said:

2 January 2009
I think the problem that Waynecpa maybe referring to is when the client is trying to get a 1099 after they've distributed the money.

In a situation like that. I would probably tell the client that I am going to send a list to the IRS disclosing everyone who has not provided the information to me.

If that doesn't scare them, then a lot of @#$%^ kissing can't hurt.

Death&Taxes (talk|edits) said:

2 January 2009
"A client logs trees from a homeowner and pays them."

Just curious, but what kind of 1099?

Waynecpa (talk|edits) said:

3 January 2009
A 1099-MISC. The client is in the logging business and gives homeowners a portion of the proceeds from selling the lumber.

Kevinh5 (talk|edits) said:

3 January 2009
[TIMBER!!!!]

Hey, D&T, I would have answered 'paper' but I didn't want to break my New Year's resolution so soon.

Kevinh5 (talk|edits) said:

3 January 2009
1099-S

Death&Taxes (talk|edits) said:

3 January 2009
Thank you, Kevin. That is what I thought, but figured I'd wait until the seller posted in the consumer section asking where to show the 1099-Misc.

Jeannec (talk|edits) said:

30 January 2009
do tax preparers recieve a 1099??? or off site bookkeeping, etc? in other words, do you issue yourself a 1099 from each of your clients when preparing their 1099s?

AEM CPA (talk|edits) said:

30 January 2009
Most of us, I'm sure, are incorporated, so it's not an issue. A sole proprietor would receive a 1099 for services over $600, though.

Arielynn (talk|edits) said:

January 30, 2009
Just to clarify, for services, a 1099 should be issued for payments of $600 or more.

Robert265 (talk|edits) said:

14 February 2009
Other question regarding 1099. What happens when you make a payment to a foreign contractor (which is not a corporation). Let's say it is an individual or a company. Do you need to issue a 1099 to a foreign vendor?

Waynecpa (talk|edits) said:

20 March 2009
An ethical dilemma - client is an S-corp that issues 1099-MISCs to many OTR truck drivers. They also have a 16 year old kid that they paid about $7,000 for "cleaning things up" around the office, which is a separate building on their land, but did not issue him a 1099. The kid's mother is an employee of the S-corp and I also do THEIR personal return (2008 already completed). Options: 1. tell the client to issue the 1099 and the other client to have their son prepare a return or 2. treat the payments as shareholder distributions (would this be a household employee then?). I don't like either one and want to let the client know my dilemma.

Any thoughts?

Jddtax (talk|edits) said:

27 November 2010
Another 1099 question....

Should a 1099 Misc be issued by a home owner who has someone (a sold proprietor) remodel their personal residence?

I say yes, but when I read the instructions it says: "Trade or business reporting only. Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit."

The homeowner is not in a trade or business operating for a gain or profit. Am I missing something?

Thanks!

Tax Writer (talk|edits) said:

27 November 2010
The homeowner is not required to file a 1099.

TAXBILLY (talk|edits) said:

28 November 2010
But a taxpayer will have to issue a 1099-MISC if the remodeling is done on a rental house starting in 2011 unless the service provider is a corporation, which brings up another question. What if the rental owner does not want to use his/her's social security number. Can the owner apply for an EIN?

taxbilly

Sofcpa (talk|edits) said:

2 March 2011
I have a client that is a marketing company. They generate leads for their customers by purchasing add space through various online marketing outlets. They get paid based on the success rate of these leads they purchase. This drives the revenue and is categorized as COGS.

Do we need to issue 1099's to LLC's or individuals for whom add space was purchased from? I've never issued a 1099 for a cost associated with COGS as they typically fall under the "payments for merchandise, telegrams, telephone, freight, and similar items".

Jeev (talk|edits) said:

23 December 2011
Looking to file large 1099 K Form for one of my client and also few hundered 1099 MISC Form. Any one out there experience using one of the tools out there such as sites that let you fill out the forms online.

These sites seems very affordable especially with accountant discount. Please suggest.

Tax4dummies (talk|edits) said:

23 December 2011
if you are already using ProSeries or Lacerte, there is a feature which is called Tax Import, with Tax Import you scan documents, and have them import to the tax return. You can learn it more from here: Tax Import, or you can watch the demo here. Good luck!

Tax Lady (talk|edits) said:

18 January 2012
I have a sole proprietor whom leased his employees in 2011 from an LLC. Does he have to send them a 1099 for the payments to the LLC? If so will it go in Box 3 or Box 7?

Thank You

Actionbsns (talk|edits) said:

18 January 2012
I have several clients who lease their employees and this is one area I have never even considered required a 1099.

Craigums (talk|edits) said:

18 January 2012
Tax Laxy, yes, I don't see why not. I would put it in Box 7. See the conditions for box 7 in the specific line instructions for 1099-Misc.

Craigums (talk|edits) said:

18 January 2012
Action, I'm curios why not? Aren't they providing a service for you?

Craigums (talk|edits) said:

18 January 2012
Anyway here's another question. Can I, as a client's CPA request a W9 from a vendor of a client?

(I'm asking as I we're going to 1099 the client's prior accountant. I don't want to ask for it if it's technically inappropriate. He would likely make as big of a deal as possible about it.)

Actionbsns (talk|edits) said:

18 January 2012
Craig, I haven't considered it mostly because the services used here are corporations so it wasn't needed. But it just didn't occur to me either. You have a point though, they are providing a service. As for asking for a W-9, I do this fairly regularly when I start 1099's. The W-9 has the client's information on it or I indicate that I am calling for the client or in my e-mail indicate that the request is on behalf of the client. Once in a while someone will not want to respond, then the client has to get involved. If you anticipate someone being a twit about it, I'd have the client make the request.

Craigums (talk|edits) said:

18 January 2012
Lol, good answer. thanks. Unfortunately he will probably be a twit about it. But...the Dalai Lama's daily wisdom for 1/18 is: "To develop patience, you need someone who willfully hurts you. Such people give us real opportunities to practice tolerance."

Tax Lady (talk|edits) said:

18 January 2012
I concur. The LLC is a trade or business. Box 7 it is.

Much appreciate you all, for your response.

JAD (talk|edits) said:

19 January 2012
I am still confused about the 1099 filing obligations for rental activities. If a rental activity is a trade/business (i.e., a real estate professional is treating it as nonpassive), does that person have to file 1099s? Or is he exempt from filing because it is a rental activity?

Anbtax (talk|edits) said:

25 January 2012
I have a client that paid a vendor more than $600 for services in 2011, but the vendor refuses to provide a W-9 or FEIN. Does anyone have any suggestions on what to do? The client will not do business with this vendor in the future because of this so he cannot do backup withholding. Should he still issue a 1099 with "refused to supply" in the vendor's TIN box? What would be the repercussions to my client since he can't now do backup withholding? Can he still take the deduction on his return? Any suggestions?

Consumer question deleted. No profile.

Antoniafav (talk|edits) said:

25 January 2012
We have been paying office rent to an LLC. Do I still need to issue a 1099 to them?

Szptax (talk|edits) said:

29 January 2012
JAD - what did you figure out regarding rentals? My understanding is that a rental investment individually owned does not need to send 1099s.

Ckenefick (talk|edits) said:

30 January 2012
We have been paying office rent to an LLC. Do I still need to issue a 1099 to them?

Y

Spell Czech (talk|edits) said:

30 January 2012
Is the LLC your landlord, or is it your landlord's real estate agent? If you're paying the real estate *agent* it's the agent's responsibility to give a 1099 to the landlord, and you *don't* have to give one to the agent.

Illini (talk|edits) said:

31 January 2012
Antonia -- if you read the W-9 instructions, it is geared towards sending 1099s to the entity that claims the income. LLC is yes if sole member LLC or if reported on partnership return. If reported on corporation or 1120S then, no you don't send the 1099. I'm beginning to like the simple slogan, "when in doubt, send it! ". We're all too busy to nitpick ourselves to death. The KEY is to get the W-9 -- if you have no W-9 then you are NOT in the driver's seat at all and you have NO IDEA of whether you are compliant or not -- you cannot take their word for it because of three outcomes -- they will lie, they will make a mistake, or they will be correct (but in an audit, you will be looking for the W-9 correct????). Once you have the W-9, you have a signed "statement" of what they are and who is paying the tax.

Ted Edwards (talk|edits) said:

14 February 2012
The 2010 Small Business Jobs Act required information reporting by landlords on 1099 of certain rental property expense payments of $600 or more. That provision was subsequently repealed. However, rental property expense payments may still be required under other provisions. The instructions for 2011 Form 1065 (page 7) state that:

"Every partnership must file Forms 1099-MISC if, in the course of its trade or business, it makes payments of rents, commissions, or other fixed or determinable income (see section 6041) totaling $600 or more to any one person during the calendar year."

Does this mean that partnerships whose only activity is owning a single rental property are required to issue 2011 Form 1099 for payments of commissions, repairs, accounting fees, etc?

MarkSC (talk|edits) said:

15 February 2012
Not if you are using Form 8825. That form is for rental properties that are not considered a "trade or business." Here is an article I came across on this subject. It considers all of the inconsistencies in the Code regarding the definition of "trade or business" and comes to this conclusion: "It appears that Congress did not intend that a rental activity should be considered a trade or business. Code Section 62 allows certain deductions in determining adjusted gross income. Separate classes were created for trade or business deductions and for deductions attributable to rents. If renting were a trade or business in every case, there would not have been any need for a separate distinction in IRC 62. In essence, IRC 212 and 62 consider renting as an investment activity."[1]

That article was written way back in 1991, but the enactment and 2011 repeal of the 1099 reporting rule for rental properties adds further support for that conclusion.

Sillymania (talk|edits) said:

15 February 2012
Two questions regarding 1099-MISC:

1. Our agent paid an expense on our behalf and submitted for reimbursement. We issued our agent a 1099-MISC. Agent claims it is not income to him but simply a reimbursement. Should we issue the 1099-Misc to him or not?

2. We paid legal fees, $2,400 to law firm in Barbados. 1099-Misc or 1042-S? We didn't do any withholding. Are we in violation?

Illini (talk|edits) said:

16 February 2012
silly - 1. I don't think the reimbursement for expenses was intended to be put on a 1099. However, tell the agent, if he reports the "income" like he's supposed to do, then the corresponding expense will bring the net income back to zero, so why worry about it?

2. not up on Barbados transactions (foreign) I bet there is some provision for withholding though. It's designed to get them to report it as U.S. income, correct?

Natalie (talk|edits) said:

February 16, 2012
Reimbursements under an accountable plan are not supposed to be included in the 1099. I would recommend amending the 1099 to show $0. Asking the agent to report it may not be a "wash," depending on what the tax laws are in the state he reports to.

Illini (talk|edits) said:

20 February 2012
state? isn't this a federal tax issue? It's either got to be income less the expense, or he has to credit his expenses by the same amount he paid out originally. I thought accountable plans were only for employee/employer relationships? An agent is an independent party and stands to gain by deducting the expense on their business tax return and NOT reporting the reimbursement as either income or a credit to his expenses. Of course he does not want the 1099 (if he wants to cheat, that is).

Trillium (talk|edits) said:

20 February 2012
From prior discussions on this topic, I know (or believe) that Natalie is referring to states that tax on gross revenue. So deducting the expenses to get net income back to where it should be doesn't offset an overstatement in the revenues for calculating tax due in those states (while it remains a wash for federal). Natalie, please correct me if I've stated that incorrectly.
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