Happy New Year! Along with the new year comes one of your first tax reporting obligations. To assist the IRS in ascertaining whether a taxpayer has reported the proper income, the law provides for the filing of information returns by persons making certain payments to others in the course of a trade or business. This filing requirement is known as the “$600 or more” rule.

Every trade or business must file information returns (e.g., Form 1099) for each calendar year for certain payments made during such year in the course of the taxpayer’s trade or business aggregating $600 or more. Examples include payments to nonemployees (aka independent contractors), vendors, landlords (see our Alert on the Qualified Business Income Deduction for rental real estate owners), freelancers, lawyers and CPAs, among others. Form 1099 is not required for payments to a corporation in 2019, unless the corporation provides medical and healthcare services or law and legal services.

Failure to timely furnish to the recipient or the IRS comes with penalties… and unnecessary attention.

Historically, the deadline for filing Form 1099-MISC with the IRS was February 28, but now if reporting nonemployee compensation, the deadline to file Form 1099-MISC with the recipient and the IRS is January 31.

You should review your records before year-end to determine whether you are required to issue a Form 1099-MISC and arrange preparation and filing in January.

Planning Strategy—You should always secure a Form W-9 from a vendor/independent contractor before issuing payment. Even if the vendor is exempt from Form 1099-MISC reporting, it is recommended that you secure and retain the Form W-9 for audit purposes.

Below are the 2019 Form 1099-MISC filing season due dates:

Reporting

Due to IRS

Due to Recipient

Nonemployee compensation

January 31, 2020

January 31, 2020

Rents, royalties, among others, exclusive of nonemployee compensation*

February 28, 2020

January 31, 2020

*If remitting electronically to the IRS, the due date is extended until March 31, 2020.

Planning Strategy—As most payments made by businesses are reportable as nonemployee compensation, the most efficient practice is to file all Forms 1099-MISC by January 31.

You should also note that many states that require returns for employee wage information and nonemployee compensation have adopted the accelerated federal due date.

TAG’s Perspective

IRS Form 1099-MISC information reporting by trades and businesses is fast approaching and is an important requirement not to be taken lightly. Penalties and attention are unwanted consequences of untimely delivery. Should you require our assistance in preparing your information returns, please contact us by January 7, 2020.