What is a 1099 form and how does it apply to your small business or non-profit organization?

Often referred to as an “information return,” a 1099 form is a tax document that businesses are required to file with the Internal Revenue Service (IRS) to report certain business expenditures. 1099 forms must be filed by all businesses and non-profit organizations, regardless of their size and yearly revenue. Currently, the threshold for reporting is limited to expenditures for services to a single non-corporate entity that total $600 or more in a calendar year. The $600 amount includes not only single transactions with a service provider, but also recurring transactions with a single entity that add up throughout the year.

Businesses and non-profit organizations must file a separate form for each service provider to whom they pay $600 or more. ¬†After filling out the correct 1099 form and filing it with the IRS, a business is also required to send a copy of the completed form to the service provider or “payee.” Given that $600 is a fairly low threshold, some businesses file hundreds of 1099 forms each year. Businesses are allowed to submit up to 249 information returns each year on paper, but all businesses who file 250 or more must do so electronically.

Due to recent legislation, the filing requirements will expand in 2012 to include corporate payees and transactions for goods as well as services. Stay tuned for more information on these changes and how they will affect your small business or non-profit organization.

If you have any specific questions about information returns and how they apply to your small business or non-profit organization, please do not hesitate to contact the Smith Rayl Law Office, LLC.

Michael Smith, Attorney at Law Emily Angel, Legal Assistant

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