December is here and most of our thoughts are turned to the holidays, celebrations, and family. We often refer to this as the “most wonderful time of the year.” There is even a song with those words in the title! But what we tend to overlook is that after December comes January. And, January means that we will begin receiving envelopes with “Important Tax Documents Enclosed” written on them. Those important tax documents may include 1099 forms, broker statements, and W-2s – all documents that we need to prepare the dreaded tax returns.
While December is a time for holiday celebrations, it is also a key time for tax planning. The Tax Cuts and Jobs Act made major changes in the tax rules for both individuals and businesses. Now is a great time to contact your accountant to discuss those changes and how they could impact your tax filings for 2018. It is good to be proactive in tax planning and we will happily assist you with it.
The Tax Cuts and Jobs Act may change your business and personal tax filings, but the requirements for issuing 1099 forms did not change. Businesses, and individuals who file a Schedule C, Schedule E, or Schedule F, are required to prepare Form 1099 for any individual or non-incorporated business that meet certain requirements. The 1099-MISC reports miscellaneous income that falls into different categories.
Below is a partial list of some of the 1099 types and what the requirements are for issuing them. Please be aware that this is not an all-inclusive list. There are many types of 1099 forms.
In general, a Form 1099-DIV is required for each person to whom you have paid $10 or more in dividends.
A Form 1099-INT must be filed for each person to whom you have paid $10 or more of interest in the course of your trade or business.
Form 1099-MISC must be filed to report royalties, rents, prizes and awards, non-employee compensation, and payments to medical assistance programs. Form 1099-MISC is used to report payments made only in the course of a trade or business. Payments are required to be reported only if the payments for the year are $600 or more, except for royalties, which require reporting if payments aggregate $10 or more. Only payments to individuals and non-incorporated businesses are to be reported with the exception of medical and health care payments. Payments for medical and health care made to individuals, unincorporated businesses, and incorporated businesses must be reported. Attorney’s fees paid in the course of trade or business must also be reported.
File Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRA’s, Insurance Contracts, etc., for each person to whom you have made a designated distribution of $10 or more from profit-sharing or retirement plans, any IRAs, annuities, pensions, insurance contracts, survivor income benefit plans, permanent and total disability payments under life insurance contracts, charitable gift annuities, etc.
Form 1099-S is used for most real estate sales. Reporting requirements include sales and exchanges of commercial, industrial and multi-unit residential structures and unimproved land.
Forms must be received by the recipient of the payments by January 31 and must be filed with the IRS by January 31. Penalties for late filing and intentional disregard can range from $50 per return up to $530 per return. Multiplied by the number of returns to be filed, the penalty can be severe.
Take time in December to begin compiling all the information necessary to prepare any 1099 forms required. It is a good practice to have W-9 forms filled out by those persons to whom you will need to issue 1099s. Keeping up-to-date and complete records is critical in being able to timely file these information returns.
If you need any assistance with 1099 forms and filings, please contact our office. We are happy to assist!