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CERTIFIED PUBLIC ACCOUNTANTS |
— Embracing the Past while Building for the Future —
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— Embracing the Past while Building for the Future —
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Section 6041A of the Internal Revenue Code requires that payments made in the course of your trade or business should be reported to the Internal Revenue Service. Form 1099-MISC should be filed for each person to whom you have paid in the course of your trade or business: n At least $10 in royalties n At least $600 in rents, services (including parts and materials), prizes and awards, other income payments, and medical and health care payments, or cash payments for fish (or other aquatic life) that you purchase from anyone engaged in the trade or business of catching fish; n Any fishing boat proceeds; or, n Gross proceeds paid to an attorney. In addition, use Form 1099-MISC to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale. Payments made to corporations, even though in excess of $600, are exempt from the informational–return requirements. However, the exemption from reporting payments made to corporations no longer applies to payments for legal services for 1998 and later years. In addition to Form 1099-MISC, you may have other filing requirements that you may be responsible for including: 1099-DIV, 1099-G, 1099-INT, 1099-R, 1099-B, 1099-S and others. Peter Shannon & Co. is available to discuss with you the tax rules relative to the various informational returns. The responsibility for accumulating the data necessary for the various informational returns and meeting the filing requirements is yours. As you are aware, there are substantial penalties for noncompliance. The Internal Revenue Service regulations have required that, in those instances where the supplier fails to provide you with either a federal identification number or social security number, you may have to withhold 28% of amounts due and remit same to the Internal Revenue Service as withholding tax. We suggest that an effort be made to determine which of your suppliers are not corporations and to whom you must provide a Form 1099 in the event that the value of the services performed exceeds $600 in the course of a year. You can send all of your suppliers a Form W-9 in order to determine whether you have any liability for reporting. Should you have any questions, please do not hesitate to contact us.
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