Best Accountants in Lancaster, CA

If your small business regularly uses independent contractors or just hires a gardener occasionally, you may need to file a Form 1099-MISC with the IRS. 1099-MISC’s help the IRS prevent tax evasion by creating a record of income that may otherwise go unreported. For that reason, there are steep penalties, including fines up to $550 per 1099-MISC if you do not file your forms accurately and on time. When do I need to file a 1099? The general rule is that whenever you hire an independent contractor for your business and pay them more than $600 during the year, you should file a 1099-MISC with the IRS and provide the contractor with a copy. An independent contractor might be someone you routinely hire to do specialized work, or it might be a plumber you have hired once. Exceptions There are a few common exceptions to the rule for filing Form 1099-MISC: · Payments to corporations In general, you don’t report payments that your business made to corporations except for very specific types of transactions, including but not limited to payments for medical services or fees paid to an attorney. · Payments reported on Form 1099-K You usually do not have to issue a 1099-MISC when you pay for services via credit card or other online payment platform like Pay Pal since the payment processor will usually report that transaction on Form 1099-K. A 1099-K is essentially the same as a 1099-MISC except it is filed by the payment processor rather than the business making the payment.