How to Know if Your Company Is 1099 Reportable
The Internal Revenue Service requires that all companies file 1099s for their independent contractors by the filing deadline. An independent contractor is any business that provides business services or rental space for which it receives payment of $600 or more throughout the year. However, corporations are generally exempt from 1099 reporting requirement. Companies must report applicable payments made to all other business types including limited liability companies, general partnerships, sole proprietorships and limited liability partnerships.
According to the Internal Revenue Code, any company that engages a non-corporate service provider to provide services, including space for rent, to which it paid at least $600 in a given tax year must include those companies in its annual 1099 filing. That company must also send copies of the 1099 to each service provider. Therefore, if your company is not a corporation and received at least $600 from another business in payment for services, your company is 1099 reportable. This applies whether you operate your business as an individual or as a separate non-corporate legal entity.
MCP Construction Products, Inc. provided $155,000 in construction services to PH IT Services, Inc. during the last calendar year. In relation to the same construction project, AB Architecture, LLP provided $15,000 in architecture services to PH IT and Allen Plumbing, LLC provided $6,000 in plumbing services. In January PH prepares its 1099-MISC documents. Since MCP is a corporation, PH IT Services does not include MCP in its 1099 reporting. PH IT prepares and sends 1099 forms to both AB Architecture and Allen Plumbing showing the $15,000 and $6,000 it paid the firms, respectively. PH IT also includes both AB Architecture and Allen Plumbing in the consolidated 1099 report it sends to the IRS.
All transactions involving barters and debt cancellation of $600 or more and the sale of secured property must be reported on 1099s for all company types including corporations. Both companies participating in an applicable two-way barter transaction must report the transaction on a 1099-B. A company cancelling applicable debt your business owed must report this on a 1099-C. The firm your company abandoned secured property to must report this on 1099-A. Companies must send 1099s to recipients by January 31 following the end of the tax year. They must paper file 1099s with the IRS by February 28 and e-file by March 31.
If your company is 1099 reportable, you must complete and submit W-9s to your business customers. Form W-9, Request for Taxpayer Identification and Certification, provides your customers with the accurate and complete information that they will need to complete a 1099 for your company. On a W-9, you include your company’s full legal business name, employee or tax identification number and address. You must sign it to certify that the information is true and correct.