Whether you've contracted with a construction company on a big project like creating a new structure or a smaller service like renovating a bathroom, your business most likely has to issue a Form 1099. In general, you must issue a 1099 to service providers, including construction contractors. The exception is for those construction companies organized and operating as corporations.
You must file Form 1099-MISC for each person or business entity to whom you paid income, made certain payments or awarded prizes. Specifically, you must file a 1099 for each person to whom you paid income or revenue for any services, attorney fees, medical and health care payments or rents. You must also file a 1099-MISC if you paid someone a minimum of $10 in royalties. File Form 1099-B for barter transactions of any size and file 1099-C for debt cancellations exceeding $600.
Construction companies operating as sole proprietorships and partnerships are treated like any other independent contractor. You must obtain a W-9 form from the construction company once you know payments you make to them will exceed the $600 1099-MISC reporting minimum. You will use the information to prepare the 1099 forms you issue to the construction company and the 1099 forms you file with the IRS. If the company fails to submit a W-9, you could be required to withhold up to 28 percent of your payments to the construction company and remit the withheld amount to the IRS.
Even construction companies that operate as legal entities separate and distinct from their owners get 1099s unless they operate as corporations. This includes limited partnerships and limited liability companies. You must request W-9s and issue and file 1099s for these construction firms just as you would if they were sole proprietorships or general partnerships. The same rules regarding withholding also apply.
Construction companies that are corporations do not receive Form 1099-MISC. However, incorporated construction companies must receive Form 1099-B or 1099-C, respectively, for barters or cancellation of a debt that it owed you. For example, you own an accounting firm and you or your firm provided $10,000 in accounting services to Construction Company, Inc. In exchange, Construction Company, Inc. provided $10,000 in services for the interior fit out of your office. To document this $10,000 transaction, you must issue Form 1099-B.
Payers must send all 1099s to applicable construction companies by January 31 following the conclusion of the tax year. The exception is the 1099-C, which you must issue by February 15. This allows sufficient time for the recipients to prepare their taxes if they use the calendar year as a fiscal year or if they use Form 1040 Schedule E to document their business income. Payers must file paper copies with the IRS by February 28; electronic copies by March 31.