February: The month for love, candy and valentines. President’s Day. Snow days. Fun stuff? Not all of February is about the fun stuff, though.
For bookkeeping and tax professionals, February is quite busy with tax reporting. One such reporting requirement on businesses and bookkeepers is the filing of Forms 1099, when needed. So what is Form 1099? And, more importantly, does my business have to issue any?
Form 1099 is the federal form required to report the payment of certain types of monies to certain categories of nonemployee individuals or businesses. There are many different Forms 1099 and this primer is designed to give a basic introduction to the various forms, with additional articles focusing on certain key types of 1099’s. Some Forms 1099 may require withholding of federal or state taxes, and others may not, as a general rule. Backup withholding may apply to some and not others. It is important for bookkeepers to have a clear understanding of these forms and their requirements.
Although the recipient’s copy of Form 1099 is due to be delivered or postmarked no later than January 31st of each year, the federal copies must be filed beginning in February either by mail or electronically. Due dates for state copies vary by state, so all bookkeeping and tax personnel should contact the appropriate state agency to comply with their requirements.
Form 1099 usually has between four and six copies of the form to be completed. One is always sent to the IRS with the summary transmittal Form 1096, summarizing all attached Forms 1099 of that type. A separate Form 1096 should be completed for each different type of Form 1099 attached, and should total, and have attached, all Forms 1099 of that type.
Additional copies of the form are for the recipient, the appropriate state or local agency (if applicable), and the employer’s copy for bookkeeping purposes. Bookkeepers and tax professionals should always keep copies of all Forms 1099s filed, along with a copy of the Form 1096 associated with each.
The Form 1099 instructions detail the deadlines for paper or electronic filing, where to file the forms, and other specifics not covered in this article. It is advisable for bookkeepers to familiarize themselves with this information.
Forms 1099, due to their varied applications in different scenarios, are appropriately coded, depending on the particular form needed to report this compensation. As a form of introduction, consider the many different types as listed here:
- 1099-A, Acquisition and 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 (under Sections 529 and 530)
- 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRA’s, Insurance Contracts, etc.
- 1099-S, Proceeds from Real Estate Transactions
- 1099-SA, Distributions from an HSA, Archer MSA, or Medicare Advantage MSA
Forms 5498, 1098, and similar forms are also important to understand when these apply to your business. In future articles, we will clarify some additional specifics about these forms, giving your bookkeepers valuable guidance for their proper completion and submission.