If your business pays nonemployees for services, you're responsible for providing that information to the IRS each year.
The timing is critical, and the clock is running down.
By Monday, Feb. 2, you must give copies of IRS Form 1099 to recipients of certain payments, including independent contractor compensation, dividends, interest, real estate transactions, attorney fees and retirement plan distributions. The IRS must receive its copies by the end of February.
Beware this tax trap: The IRS holds you responsible for providing the correct Social Security number or employee identification number, address, name and amount on the form.
Even if you're given the wrong information by a contractor, you're still responsible.
The penalties: $15 per return for an error you correct within 30 days; $30 per return for errors you correct after 30 days but before Aug. 1; $50 per return for errors corrected after Aug. 1.
Advice: Here are some of the most common types of Form 1099 payments and the forms you need to file:
• If you used the services of someone and paid that person more than $600 during the year, file IRS Form 1099-MISC.
• If you paid more than $600 interest on an installment note that you issued to buy a business or a business asset, file IRS Form1099-INT.
• If you received more than $10,000 in cash in one transaction, file IRS Form 8300 within 15 days of the transaction, plus send a copy of the form to the other party by Feb. 2.