Reporting Payments to Vendors and/or Third Parties
Does your business issue payments to third parties via check or cash for services, non-employee compensation, rent or other items? If so, you will want to make sure you comply with the annual reporting requirements outlined by the IRS or you risk losing the ability to deduct those payments as a business expense on your entity's tax return. This reporting requirement, often referred to as "1099 reporting", is an annual filing requirement for any entity or individual business owner.
The IRS requires any payments of $600 or more made during the calendar year for rent, services, legal fees, commissions, prizes, awards, and non-employee compensation to be included on Form 1099. Please note that this total is "in aggregate" by vendor and not just based on each individual payment. For example, if you paid a contractor three separate payments of $200 each during the 2014 calendar year, the annual total paid to that contractor would be $600 and should be reported.
Certain payments are excluded from the reporting requirements. For example, any payments made to a corporation or non-profit entity do not need to be included. If you issue payments via a credit or debit card, those payments are also excluded from the reporting requirements.
Cornerstone can help you with completing and filing the 1099- forms. If you would like us to provide 1099 preparation and filing services, please complete the efile authorization and information request forms and return to our office. If you think you have a requirement, but would like to confirm before filling this out, please contact us. For more information, please read our annual 1099 letter available here.
As always, feel free to contact anyone from our office and we will help answer any questions you might have regarding this reporting requirement!