Form 1099 Instructions and General Discussion 1 2017 New Mexico Association of Counties Annual Conference Chip Low, CPA CGMA Lea County Finance Director (o) 575-396-8653 (c) 575-704-6500 clow@leacounty.net
General I.R.S. Guidance 2 2017 General Instructions for Certain Information Returns 2017 Instructions for Form 1099-MISC This information is available on www.irs.gov.
Types of Form 1099 3 1099 A Acquisition or Abandonment of Secured Property 1099 B Proceeds from Broker and Barter Exchange Transactions 1099 C Cancellation of Debt 1099 CAP Changes in Corporate Control and Capital Structure 1099 DIV Dividends and Distributions 1099 G Certain Government Payments 1099 INT Interest Income 1099 K Payment Card and Third Party Network Transactions 1099 LTC Long-Term Care and Accelerated Death Benefits 1099 MISC Miscellaneous Income 1099 OID Original Issue Discount 1099 PATR Taxable Distributions Received From Cooperatives 1099 Q Payments from Qualified Education Programs 1099 QA Distribution from ABLE Accounts 1099 R Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, etc. 1099 S Proceeds from Real Estate Transactions 1099 SA Distributions from an HSA, Archer MSA, or Medicare Advantage MSA
Form 1099 MISC Due Dates to Recipients 4 If reporting Non-employee compensation payments (box 7) the due date to the recipient is on or before January 31, 2018. If reporting Substitute payments in lieu of dividends or interests (box 8) or Gross proceeds paid to an attorney (box 14) the due date to the recipient is February 15, 2018. For all other reported payments the due date to the recipient is January 31, 2018.
Form 1099 MISC IRS Filing Dates 5 The Form 1096 along with copies of the Form 1099 s are due to the IRS by February 28, 2018, if you file on paper, or April 2, 2018, if you file electronically. If any payments for Nonemployee compensation are reported in box 7, the due date is January 31, 2018, for both paper and electronic returns. Form 8809 may used to request an initial or additional extension of time to file only the forms shown in line 6 for the current tax year. Line 6 includes both Form 1099 and 1099-MISC NEC reporting only. The due date of the Form 8809 is January 31, 2018, if there is Nonemployee compensation and all other Form 1099 payments is February 28, 2018, if on paper, and March 31, 2018, if electronically.
Form 1099 MISC Payments to be Reported 6 The following are examples of payments to be reported on Form 1099-MISC: Attorney, fee and gross proceeds Auto reimbursements, nonemployee Bonuses, nonemployee Car expense, nonemployee Commissions, nonemployee Compensation, nonemployee Crop insurance proceeds Damages Direct sales of consumer products for resale Directors fees Fees, nonemployee Fishing boat crew members proceeds Fish purchase for cash Golden parachute, nonemployee Health Care Services Indian gaming profits paid to tribal members Medical services Mileage, nonemployee Nonemployee compensation Nonqualified deferred compensation, nonemployee Prizes, nonemployee Punitive damages Rents Royalties Substitute payments in lieu of dividends Vacation allowance, nonemployee
Form 1099 MISC Payments to be Reported 7 Payments made by federal, state, or local government agencies are reportable with exceptions: Payments to a corporation including an LLC that is treated as a C or S corporation. However, the following payments made to corporations generally must be included, medical and health care payments (box 6), fish purchases (box 7), Attorneys fees (box 7), gross proceeds paid to an attorney (box 14), substitute payments in lieu of dividends (box 8). Payments for merchandise, telegrams, telephone, freight, storage, and similar items. Payments of rent to real estate agents. The real estate agent must use Form 1099-MISC to report the rent paid over to the property owner. Payments to a tax-exempt organization, the United States, or a state.
Form 1099 MISC Payments to be Reported 8 Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity and are not subject to reporting on Form 1099-MISC. A payment to an informer as an award, fee, or reward for information about criminal activity does not have to be reported if the payment is made by a federal, state, or local government agency. Payments to Attorneys The term attorney includes a law firm or other provider of legal services. Attorneys fees of $600 or more paid in the course of your trade or business are reportable. They will either be entered in box 7 or box 14 depending on the character of the payment: Payments for services provided to the county are entered in box 7. Payments for settlement agreements are entered into box 14. The exemption from reporting payments made to corporations does not apply to payments made for legal services.
Form 1099 MISC Payments to be Reported 9 If an employee dies during the year, you must report the accrued wages, vacation pay, and other compensation paid after the date of death. If you made the payment in the same year the employee died, you must withhold social security and Medicare taxes on the payment and report them only as social security and Medicare wages on the employee s Form W-2 to ensure that proper social security and Medicare credit is received. If you made the payment after the year of death, do not report it on Form W-2, and do not withhold social security and Medicare taxes. Whether the payment is made in the year of death or after the year of death, you also must report the payment to the estate or beneficiary on Form 1099-MISC. Report the payment in box 3 rather than box 7.
Form 1099 MISC Box 1 - Rents 10 Enter amounts of $600 or more for all types of rents, such as the following: Real estate rentals paid for office space. However, you do not have to report these payments on Form 1099-MISC if you paid them to a real estate agent. Machine rentals (for example, renting a maintainer to blade roads). If the machine rental is part of a contract that includes both the use of the machine and the operator, prorate the rental between the rent of the machine (box 1) and the operator s charge (box 7). Land rentals (parking lots, etc.).
Form 1099 MISC Box 2 - Royalties 11 Enter gross royalty payments (or similar amounts) of $10 or more. Report royalties from oil, gas, or other mineral properties before reduction for severance and other taxes that may have been withheld and paid. Surface royalties should be reported in box 1.
Form 1099 MISC Box 3 Other Income 12 Enter other income of $600 or more required to be reported on Form 1099-MISC that is not reportable in one of the other boxes on the form. Also enter into box 3 prizes and awards that are not for services performed. Do not include prizes and awards paid to your employees. Report these on Form W-2. Prizes and awards for services performed by nonemployees, such as an award for the top commission salesperson should be reported in box 7. Also report in box 3 all punitive damages, any damage for nonphysical injuries or sickness, and any other taxable damages. Report all compensatory damages for nonphysical injuries or sickness, such as employment discrimination or defamation.
Form 1099 MISC Box 4 FIT Withheld 13 Enter backup withholding. For example, persons who have not furnished their TIN s to you are subject to withholding on payments required to be reported in boxes 1, 2, 3, 5, 6, 7, 8, 10, and 14 with exceptions.
Form 1099 MISC Box 6 Medical & Health Care Payments 14 Enter payments of $600 or more made in the course of your trade or business to each physician or other supplier or provider of medical or health care services. Include payments made by medical and health care insurers under health, accident, and sickness insurance programs. If the payment is made to a corporation, list the corporation as the recipient rather than the individual providing the service. Reporting is not required for payments to pharmacies for prescription drugs. The exemption from issuing Form 1099-MISC to corporation does not apply to payments for medical or health care services provided by corporations, including professional corporations. The exemption does apply to payments made to a tax-exempt hospital or extended care facility owned and operated by the United States, a state, the District of Columbia, or any other of their political subdivisions, agencies, or instrumentalities.
Form 1099 MISC Box 7 Nonemployee Compensation 15 Enter nonemployee compensation of $600 or more. Include fees, commissions, prizes and awards for services performed as a nonemployee, other forms of compensation for services performed for your trade or business by an individual who is not your employee, and fish purchases for cash. What is nonemployee compensation? If the following conditions are met, you must generally report a payment as nonemployee compensation: You made the payment to someone who is not your employee. You made the payment for services in the course of your trade or business (including governments). You made the payment to an individual, partnership, estate, or, in some cases, a corporation. You made payments to the payee of at least $600 during the year.
Form 1099 MISC Box 7 Nonemployee Compensation Cont d. 16 Some examples of payments to be reported in box 7: Professional service fees, such as fees to attorneys (including corporations, accountants, architects, contractors, engineers, etc. Payment for services, including payment for parts or materials used to perform the services if supplying the parts or materials was incidental to providing the service. A fee paid to a nonemployee, including an independent contractor, or travel reimbursement for which the nonemployee did not account to the payer, if the fee and reimbursement total at least $600. Payments to nonemployee entertainers for services. Exchanges of services between individuals in the course of their trade or business.
Form 1099 MISC Box 7 Nonemployee Compensation Cont d. 17 IRS 20 Factor Test: Independent Contractor or Employee Instructions. Workers who are required to comply with others instructions about when, where, and how they are to work ordinarily employees. Training. Training workers indicates that employers exercise control over the means by which results are accomplished. Integration. When the success or continuation of a business depends on the performance of certain services, the workers performing those services are subject to a certain amount of control by the owners of the businesses. Services rendered personally. If services must be rendered personally, employers control both the means and the results of the work.
Form 1099 MISC Box 7 Nonemployee Compensation Cont d. 18 IRS 20 Factor Test: Independent Contractor or Employee Hiring, supervising, and paying assistants. Control is exercised if employers hire, supervise, and pay assistants. Continuing relationships. Continuing relationships between workers and employers indicate that employer-employee relationships exist. Set hours of work. The establishment of set hours of work by employers indicates control. Full-time required. If workers must devote full time to employers businesses, employers have control over workers time. Independent contractors are free to work when and for whom they choose. Doing work on employers premises. Control is indicated if the work is performed on employers premises
Form 1099 MISC Box 7 Nonemployee Compensation Cont d. 19 IRS 20 Factor Test: Independent Contractor or Employee Order or sequences set. Control is indicated if workers are not free to choose their own patterns of work but must perform services in the sequences set by the employers. Oral or written reports. Control is indicated if workers must submit regular oral or written reports employers. Payment by hour, week, or month. This points to employer-employee relationships, provided that this method of payment is not just a convenient way of paying a lump sum agreed on as the cost of a job. Independent contractors are usually paid by the job or on straight commission. Payment of business and/or traveling expense. Employers paying workers expenses of this nature shows that employer-employee relationships usually exist. Credit to Angelo State Small Business Development Center
Form 1099 MISC Box 7 Nonemployee Compensation Cont d. 20 IRS 20 Factor Test: Independent Contractor or Employee Furnishing tools and materials. If employers furnish significant tools, materials, and other equipment, employer-employee relationships exist. Significant investments. Workers are independent contractors if they invest in facilities that are not typically maintained by employees (such as an office rented at fair market value from an unrelated party). Employees depend on employers for such facilities. Realization of profits or loses. Workers who can realize profits or losses (in addition to profits or losses ordinarily realized by employees) they are independent contractors. Workers who cannot are generally employees. Working for more than one firm at a time. If workers perform services for a number of unrelated persons at the same time, they are usually independent contractors.
Form 1099 MISC Box 7 Nonemployee Compensation Cont d. 21 IRS 20 Factor Test: Independent Contractor or Employee Making services available to the general public. Workers are usually independent contractors if they make their services available to the general public on a regular and consistent basis. Right to discharge. The right of employers to discharge workers indicates that the workers are employees. Right to terminate. Workers are employees if they have the right to end their relationships with their principals at any time without incurring liability.
Form 1099 MISC Box 7 Nonemployee Compensation Cont d. 22 IRS 20 Factor Test: Independent Contractor or Employee Making services available to the general public. Workers are usually independent contractors if they make their services available to the general public on a regular and consistent basis. Right to discharge. The right of employers to discharge workers indicates that the workers are employees. Right to terminate. Workers are employees if they have the right to end their relationships with their principals at any time without incurring liability. Credit to Angelo State Small Business Development Center
Form 1099 MISC Box 14 Gross Proceeds Paid to an Attorney 23 Payments made to an attorney in the course of your trade or business in connection with legal services, for example, as in a settlement agreement are reportable in box 14. These rules apply whether or not the legal services are provided to the payer and whether or not the attorney is the exclusive payee. General legal fees are reported in box 7.
Form 1099 MISC Boxes 5,8,10,13 24 Payments made by a local government that would require entries to these boxes would be an exception and normally not seen.
Form W-9 General Rules 25 Use Form W-9 to request the taxpayer identification number (TIN) of a U.S. person (including a resident alien) and to request certain certifications and claims for exemptions. Form W-9 (or an acceptable substitute) is used by persons required to file information returns with the IRS to get the payee s (or other person s) correct name and TIN. For individuals, the TIN is generally a social security number (SSN). Individuals who become U.S. resident aliens for tax purposes are not eligible to obtain an SSN. These individuals must apply for an ITIN on Form W-7, unless they have a pending application for an SSN. The ITIN must be provided on Form W-9 if the taxpayer has one. You may develop and use your own Form W-9 (a substitute Form W-9) if its content is substantially similar to the official IRS Form W-9 and it satisfies certain certification requirements.
Form W-9 General Rules 26 You may develop and use your own Form W-9 (a substitute Form W-9) if its content is substantially similar to the official IRS Form W-9 and it satisfies certain certification requirements. The certifications on the substitute Form W-9 must clearly state (as shown on the official Form W-9) that under penalties of perjury: 1. The payee s TIN is correct, 2. The payee is not subject to backup withholding due to failure to report interest and dividend income, 3. The payee is a U.S. person, and 4. The FATCA code entered on this form (if any) indicating that the payee is exempt from FATCA reporting is correct. You may not use substitute Form W-9 that requires the payee, by signing, to agree to provisions unrelated to the required certifications, or imply that a payee may be subject to backup withholding unless the payee agrees to provisions that are unrelated to the required certifications.
Form W-9 Backup Withholding 27 Payees Exempt From Backup Withholding: An organization exempt from tax under section 501(a). The United States or any of its agencies or instrumentalities A state, the District of Columbia, a U.S. commonwealth or possession, or any of their political subdivisions, agencies, or instrumentalities A corporation. However, payments to a corporation and reportable on Form 1099-MISC are not exempt from backup withholding if they are (1) medical and health payments, (2) attorneys fees (includes gross proceeds paid to an attorney). Payments Exempt from Backup Withholding: Dividends and Patronage Dividends Interest payments Cancelled debts The backup withholding rate is 28% for reportable payments.