Do you need to issue a Form 1099-MISC for services rendered?

CAUTION TAX FORMS NEEDED!Who Must Issue 1099’s?

Businesses.  You must report payments to others for services.
Nominees.  If you are receiving income – but part of the income belongs to another.

BUSINESSES
If you paid $600.00  or more to a person or business during 2013 and may need to issue a form. This applies to business expenses only.  You don’t need to report payment for personal expenses or any payments made to a corporation.
This is true even if you are a one-person office.

For example, one of our clients  is an independent consultant.  She has a web instructor come to her office to tutor her on web work she provides to her clients.  Our client is an independent contractor, and the person she has tutoring her is an independent contractor.   In 2013 she paid her instructor over $1,400 and she will need to issue a 1099.  Now, because she has us, she doesn’t have to worry about the paperwork and knowing what forms need to go to the state or the federal government.  She just has to provide us with the information and numbers, and we take care of it.

But for those people who want to “do it yourself”.

“Any business or government entity (defined as a “Service-Recipient”) is required to file a federal Form 1099-MISC for service performed by an independent contractor (defined as Service Provider)”.¹  Each state has its own set of laws regulating who must file 1099’s.

The client we wrote about above lives in California. In addition to filing a 1099-MISC., she will need to file Form DE 542, Report of Independent Contractors.   Per California’s EDD “an independent contractor is further defined as an individual who is not an employee of the business or government entity, … and who receives compensation or executes a contract for services performed for that business or government entity either in or outside of California”.

I can help – or you can get forms from the IRS and “DO IT YOURSELF”.  If you discover it is overwhelming, and you need my help – Please call ASAP.  We started scheduling tax reviews in early December, so please call us soon.  619-589-8680.

If you are new to all of this, we will provide some valuable links right here.

  1. IRS Page on 1099-MISC, Independent Contractors, and Self-Employed
  2. IRS portal for State Government Websites.  Each page is set up to provide information on what kind of taxes are payable, the offices you need to contact, etc.  The page includes links to respective State Website, Doing Business in the State, Taxation & Finance, Employer Link, General
  3. California’s page for DE-542 Form

 IF YOU ARE A “NOMINEE” 

If you are sharing a savings account with, let’s say, your brother or sister, but it is your social security number that appears on the 1099-INT.  You are a nominee.  That means even if you pay $10 or more, you should issue them a Form 1099 to the other party.  You would use the same type of 1099 Form to send out to the other name on the account, just like you received but you will be filing as a “middle man”. ²

 IF YOU HAVE A “RENTAL MANAGER” 

If you own rental properties, they are considered businesses. If you have a property manager managing those properties, that is the person who will send you the 1099 reporting the rental income.”³

¹Instructions for completing the Report of Independent Contractor(s).
² Tax News & Tips, Year End.
³ Ibid.