Information Return Reporting Requirements (1099s)

Whenever a service is rendered by anyone other than an employee or a corporation, the payer must report any payment made for that service to the IRS.  Brokers and financial institutions are also required to report transactions that arose directly or indirectly from the services provided by them. 

Although this requirement has been in place for years, the IRS has recently begun to step up enforcement in the reporting of this information (on Form 1099). Additionally, penalties for late filing (or non-filing) of the information returns have increased substantially, and could be as high as $200 per late or non-filed 1099.  When a 1099 is required, a copy must be filed with the IRS, and a copy must be given to the service provider.

 Various 1099s are required to report payments in excess of $600 made to individuals, trusts, partnerships, and LLCs and generally include payments for:

  • Non-employee compensation, awards, bonuses, commissions and any other remuneration
  • Punitive damages resulting from litigation
  • Rents and royalties
  • Sales proceeds from the sale of an asset, including stocks
  • Current income (interest and dividends) from financial institutions
  • Any other payment in excess of $600 made for service related transactions

The 1099s are generally required to be filed with the IRS by February 28, but copies should be provided to the recipient by January 31.  The reporting requirements can be complicated.  Part of this process is the need to obtain a W-9 (Request for Tax Identification Number) from any payee to which a 1099 may ultimately be issued.  This document requires a payee to furnish a taxpayer ID number and other information.  This also provides a certification to the payer that the payee is not subject to backup withholding.

Please contact the BBD Tax Department at 215/567-7770 for additional information or with any questions you may have.