The reason is IRS Form 1099 provides the means of reporting very specific types of income from non-employment related sources that might not be reported elsewhere. If you paid someone for services (other than employees) you must issue them a 1099 by January 31 of the following year.

You need to issue a  1099 for all payments for services to unincorporated individuals and businesses where the accumulated total is $600 or more.  If you pay a Limited Liability Company (LLC) that is taxed like a corporation you still have to issue a 1099 to that LLC.  Make sure you have the correct name, employer identification or social security number and address of everyone you pay before you pay them.

What if I don’t file a 1099?

You can be subjected to an array of steep penalties if you cannot show reasonable cause.  If the payee fails to furnish his or her taxpayer identification number (TIN), they are subject to backup withholding at a 28% rate. If you do not collect and pay backup withholding from affected payees as required, you may become liable for any uncollected amount.

Do not send a 1099 to someone you’ve paid by credit card, debit card or by services like PayPal. Such payments will be reported on a 1099K that they will receive from their merchant services provider.

Do not issue 1099’s to corporations.

If you have any questions about this, call our office. PS Tax Solutions provides complete accounting services in Tampa or Lutz.  For more information, go to https://pstaxsolutions.com/ or call (813) 563-8724 for an appointment.