Oh, 1099s. No one wants to send them and no one wants to receive them, yet it’s totally necessary unless you want to get penalized by the Internal Revenue Service. Despite the fact that nobody likes doing taxes unless they’re an accountant because tax time means payday, Form 1099s are actually not as complicated as you might think. Most small businesses are only dealing with Form 1099-MISC rather than the litany of other 1099 forms for vendors, and even then, it’s as simple as sending out a W9, getting some information from your vendor and reporting the money you’ve spent.
So, do you need to send out a Form 1099? It depends on the type of business you do and the type of vendors you’re dealing with.
A 1099-MISC is the form any business sends anyone they pay to do a service who isn’t an employee such as those loyal workers who signed a W-2 at the start of their contract and already get their taxes removed from their paychecks. This can be sent to everyone from the contractor you hired to assemble your office furniture and the artist you paid royalties to the lucky person who won some prize money or the attorney you paid to handle some legal snafu.
If you paid anyone more than $600 who isn’t an employee, you probably have to send out this form. If you paid someone $10 or more in royalties, you have to send this form as well.
The 1099-INT form is usually used by banks, brokerage firms, credit unions and sometimes even the companies handling your student loans. If you paid a vendor more than $10 in interest, you’ve got to send out a 1099-INT.
Form 1099-G is widely used by the government for unemployment compensation, and local income tax refunds, credits or offsets; however, you may also need to file a Form 1099-G if you’re giving out taxable grants or agricultural payments, for example, if your business pays out a grant to research greener methods of manufacturing.
If you’re running a real-estate business, you better get yourself acquainted with Form 1099-S. This form is used to report capital gains and needs to be filed anytime someone makes more than $600 on a real estate deal. For example, if you invest in a $100,000 property and sell it for $300,000, you’ll need to report your $200,000 in profits. The good news is, if you handle your real estate business with a title company or attorney, they’re probably already filing this form on your behalf. You also don’t need to file a Form 1099-S if the sale price of your property was less than $250,000.