If you're a small business owner or self-employed person, you are probably well aware of the annual requirement to file an income tax return. In addition, if you made certain payments to sole proprietors in the course of your business, you may also be required to issue information returns. Read on to find out if this reporting responsibility applies to you. The most common information return is known as Form 1099-MISC. This form must be given to each person to whom you paid $600 or more for services rendered over the course of a calendar year. Generally speaking, you are not required to issue this Form 1099 to corporations. The IRS' main concern here is payments made to sole proprietors, i.e. self-employed individuals such as independent contractors, freelancers and consultants who report their business income on Schedule C as part of their personal income tax return. It is your responsibility to give the 1099 to the recipient no later than January 31 of the year following the year in which the payments were made. You can give it to them in person or you can mail it and it will be considered timely if the postmark date is on or before January 31. It is also your responsibility to send a copy of these 1099's to the IRS, along with a summary report known as Form 1096, by February 28 of the next year. The IRS has taken steps recently to increase its monitoring of the filing of Form 1099-MISC. On the 2011 Schedule C, two new lines have been added that remind you of these obligations. Line I asks the question "Did you make any payments in 2011 that would require you to file Form(s) 1099?" You must answer that question with a "Yes" or a "No". And obviously, if you answer "Yes", but do not file any Forms 1099-MISC with the IRS, they will be contacting you to investigate the matter further. Line J of Schedule C then asks, "If 'Yes' (to the previous question), did you or will you file all required Forms 1099?" So you can see that the IRS has stepped up its efforts to enforce the Form 1099-MISC filing requirements. Failure to file these forms, or failure to file them properly, can result in IRS penalties and certainly invites further government scrutiny of your income tax returns. Please consider this article as a word to the wise, which should be sufficient to motivate you to pursue compliance with the 1099 reporting rules and regulations.
- 2010 Personal Tax Return Filing Deadline Is Extended Again
- Do You Know the Difference Between a W2 and a 1099?
- W2 or 1099 -- Does It Really Matter?
- September 15 business tax return deadline looms: are you ready?
- How The New 2011 Social Security Tax Cut Affects Employees, Employers, And The Self-Employed