1099If you have a trade or business, the Internal Revenue Service (IRS) requires you to report certain payments you make as part of your business to both the payee and the IRS. There are new tax law changes regarding 1099-MISC forms that you need to know. Please take a few minutes to read the enclosed information so that you can prepare now for these changes and avoid costly fines regarding the filing of these forms.

If you paid anyone $600 or more during 2016, you and/or your business may need to issue Form 1099-MISC to the individuals or businesses that you paid. This memo will explain your requirements and penalties for not following the regulations. We will also explain the costs to engage AVL Tax Professionals to prepare these forms for you.

When is a 1099-MISC Required?

You are required to report on Form 1099-MISC when payments are made in the course of your trade or business. The business can be from general business, farming, rentals, or any trade or business which you own with an intent to operate for gain or profit.

You must file a Form 1099-MISC, Miscellaneous Income, for each person or entity to who you have paid during the year that is not a Corporation:

-        At least $10 in Royalties

-        At least $600 in

  • Rents
  • Services (the dollar amount includes parts and materials)
  • Prizes and Awards
  • Other Income Payments
  • Barter Income
  • Medical and Health Care Payments
  • Crop Insurance Payments
  • Cash Payments for fish you purchase from anyone engaged in the trade or business of catching fish
  • Any fishing boat proceeds
  • Gross proceeds of $600 or more paid to an attorney (no exception for corporation)

Generally you do not have to issue a Form 1099-MISC for non-employee compensation paid to a corporation. Payments to corporations are reported only if they are for medical, veterinary, health care, legal or fishing activities.

What should be included on a Form 1099?

The following information is required by IRS for the processing of the 1099:

-        The payee’s full name

-        The payee’s Social Security Number or Employer Identification Number

-        The payee’s legal mailing address

-        The dollar amount, including labor and materials, paid to the payee

All of this information should be obtained from a completed form W-9. Our office recommends that you ALWAYS obtain a completed Form W-9 from any new contractor or business BEFORE you issue them a check or other payment.

Regulations and Penalties

With the passing of the PATH Act by Congress, there have been significant changes made to the issue of 1099’s. These are a few of those changes:

  1. All 1099’s must be completed and mailed to both the payee and the IRS no later than January 31st, 2017.
  2. The penalty for not filing a required 1099 is $100 per form.
  3. The penalty for Intentional Disregard is $250 per payee.
  4. Any expenses on your tax return that required a 1099 to be issued, such as rents and subcontractors, will be disallowed if you fail to file the proper 1099’s.

Can AVL Tax Professionals file my Form 1099’s?

We are able to prepare all Form 1099’s for you and this year we will be filing them electronically. There is an additional charge separate from your income tax preparation for this service.

In order to complete these forms:

  1. Please provide us with a complete list of anyone needing a Form 1099. The following information is required:
    1. Legal name and address of the Payee
    2. Social Security Number or Employer Identification Number for the payee
    3. Total amount of payments made to payee
    4. Type of payment, such as payment for services, rents, royalties, etc.
  2. We will complete 1099 projects in the order they are received in our office.
  3. If the package of data you send to us is not complete, we will have to reserve the right to not begin work until the full package is received.

For information received after January 20th, we cannot not guarantee that we will be able to meet the January 31st deadline.

If you have any questions or concerns, please call us at (828) 277-4177 or email This email address is being protected from spambots. You need JavaScript enabled to view it.