Here are some general guidelines:
1. Type of Payment:
You should issue a Form 1099 for payments made to individuals, partnerships, or LLCs (that are not taxed as corporations) for services rendered, including freelancers, contractors, and other non-employee compensation. Payments for goods, rent, or other business-related payments typically do not require a 1099.
2. Payment Amount:
Generally, you need to issue a Form 1099 for payments totaling $600 or more during the calendar year. This includes all payments made to the vendor, not individual transactions.
3. Type of Vendor:
Payments made to individuals, sole proprietors, partnerships, or LLCs that are not taxed as corporations are typically subject to 1099 reporting. Corporations (other than certain exceptions, such as legal and medical service providers) are usually exempt from 1099 reporting.
4. Excluded Payments:
Some payments are exempt from 1099 reporting, even if they meet the $600 threshold. These include payments made to tax-exempt organizations, payments for merchandise, and in some cases, payments made by credit card.
5. Aggregated Payments:**
You need to aggregate payments made to the vendor during the calendar year. If the total is $600 or more, you are required to issue a Form 1099.
6. Documentation:
Ensure you have accurate and up-to-date information for the vendor, including their legal name, address, and Taxpayer Identification Number (TIN) or Social Security Number (SSN). You may use Form W-9 to collect this information from the vendor.
7. Check for Exceptions:
Some payments are exempt from 1099 reporting, such as payments for rent to real estate agents or property managers. Familiarize yourself with IRS guidelines and exceptions.
8. Timing:
Ensure that you issue the Form 1099 by the IRS deadline, which is usually the end of January for the previous calendar year. Also, file a copy of 1099 with the IRS.
