Generally, any trade or business that makes payments for interest, rents, or payments for services not reported on Form W-2 that totals $600 or more to a single payee must report the payments to the IRS and the payee by filing Form 1099. Usually this requirement does not apply to payments to corporations, but this requirement does apply to payments to corporations for attorneys’ fees and payments made to corporations providing medical or health care services. The reporting is not required if the payment is made using a credit card, debit card or a qualified third party payment network.
The Form 1099 is required to be filed with the recipient by January 31st and with the IRS by the end of February following the year the payment was made. There are penalties for failing to file or late filing of the 1099 forms that range from $100 – $500 per 1099.
The IRS now includes two questions regarding Form 1099 on all business returns. The two questions are:
1. Did you make any payments in 2012 that would require you to file Form 1099?
2. If “Yes,” did you or will you file all required Forms 1099?
These two questions are on Form 1040 Schedules C, F and E and also on Forms 1065, 1120, and 1120S.
Therefore, any taxpayer who operates a trade or business that files the returns identified above should be providing the answer to these questions to their tax preparer so the tax returns can be filed accurately.