As a business owner, you may need to issue 1099s to certain people you paid money to in your business this year. A 1099 may need issued if:
- You paid $600 or more in total to any 1 person during the year for services provided to your business. This also applies to payments made to businesses organized as partnerships. However, a 1099 does NOT need issued for payments made to a corporation. Payments made to an LLC may or may not require a 1099, depending on how the LLC is taxed.
- You paid $600 or more in total to a law firm during the year, regardless of how the law firm is organized. In other words, even if the law firm is a corporation, you would need to issue it a 1099 if you paid the firm $600 or more.
- You paid $600 or more in rental or lease payments to an unincorporated person or partnership during the year (similar rules as listed under item #1).
The due date for issuing 1099s to recipients is January 31. As a reminder, tax returns now contain two questions pertaining to whether or not you issued 1099s. There are penalties for not issuing 1099s when you were required to, or for issuing 1099s after the due date.
This blog post obviously oversimplifies 1099s. Active businesses often grapple with who needs issued a 1099, and sometimes it’s not entirely clear what payments should be included on the 1099 versus what might not need included.
Your accountant can help navigate these issues. You do have an accountant, right?