1099 Reporting Requirements for Business and Rental Property Owners
We recommend that you obtain a completed W-9 from your vendors and subcontractors before any payments are made to them. This will provide your company with the correct information (legal name, entity type, and identification number so you can properly determine your 1099 reporting requirements for this vendor or subcontractor.
Current tax returns have a question regarding 1099 reporting
and compliance with this rule. Therefore, compliance (or
lack of) is reported on the tax return and subsequent
discovery of non-compliance when the company has stated that
all required 1099s have been issued would most likely result
in significant penalties for failure to file Forms
1099s.
We have attached a W-9 Form. You can also get this form at
www.irs.gov.
W-9.pdf
Here is the information regarding the 1099 reporting
requirements.
Dear Client:
Under the current tax laws,
businesses (including corporations, partnerships, and sole
proprietors) and rental property owners will report
aggregated payments of $600 or more to all non-corporation
vendors – but not tax exempt organizations –
for services rendered. The businesses
should track all payments made directly or
through their employees or owners.
Taxpayers receiving income from
renting real estate should be aware of their new
information-reporting responsibilities. For this
purpose only, rental income recipients are subject to the
same requirements as a trade or business, even if they are
not otherwise treated as engaged in the trade or business of
renting real estate.
Action
plans should identify all reportable transactions,
characterize the type of payment, and develop a process to
aggregate payments by reportable entity.
Collect
Implementing this change may
require collaboration among businesses, software vendors or
other consultants and CPAs. Businesses routinely
collect name, address and taxpayer identification numbers
(TIN) of payees for performance of services. However,
businesses probably don’t routinely obtain a TIN and
W-9 from every party with whom they make a purchase,
including those payments reimbursed to an
employee.
Action plans should identify the appropriate
modifications to payment voucher or expense recording
software, and to systems for sorting and reporting payment
transactions. Also, if you expect the new requirements to
increase required information returns to be 250 or greater,
electronic filing will be mandatory.
Comply
Penalties for failure to file information returns correctly and by the prescribed filing date have substantually increased.
Action plans should identify a compliance project
timeline for implementing new reporting requirements to avoid
compliance penalties.
Receive
Businesses will not only provide
information returns to their vendors, but will be receiving
these returns for their own reportable gross income.
Currently, the IRS presumes all information returns to be
correct and it is the responsibility of the taxpayer to
report those payments received as income. Businesses
with fiscal year ends will have the added challenge of
reconciling 1099 returns received based on calendar year
transactions to fiscal year gross income.
Action plans should include a process to reconcile 1099
reported transactions to the income reported on the
appropriate tax return.
RECOMMENDED ACTION PLAN
We recommend that you obtain a completed W-9 from your vendors and subcontractors.