E-File Magic 1099 Software – Blog

Gina’s Tax Tips posted a blog Wednesday on 1099s - not very often I see this so I am celebrating by re-posting it here.

Business owners and landlords are required to give a Form 1099-MISC to any service provider (independent contractor) you paid $600 or more for services provided to your business (or rental property) during the year.  It’s also advisable if you are claiming the home office deduction to provide a Form 1099 to anyone who provided a home service that you intend on claiming as an expense as part of your home office deduction.  The deadline is January 31.

In general if your service provider is a corporate entity then you do not have to send them a Form 1099.  The main exception is attorneys.  No matter what type of entity your attorney happens to practice under you are required to send them a Form 1099 for the services they provide to your business, rental property or home office.

The main benefit of preparing Form 1099s is that it protects your business, rental and/or home office tax deduction. If you fail to prepare a required Form 1099 and later get audited, your deduction of the fees paid to the service provider will most likely be disallowed.  This means additional taxes, interest and penalties.

Please note….Form 1099 cannot be used for workers who should properly be treated as your employees (this includes household employees – please see IRS Publication 926). You must provide them with a Form W-2 instead.