10/10/2006
IRS Third-Party Reporting Promotes Accurate Business Income Reporting
by Laura Fine, Assistant State Director
In many cases, the tax law requires third-party payers, such as small businesses or individuals, to report to the IRS payments they have made to subcontractors, attorneys, architects and other service providers.
Form 1099-MISC, Miscellaneous Income, is most commonly used by third-party payers to report payments made in the course of a trade or business to others for services. Third-party payers should report the following on Form 1099-MISC:
• Payments of $600 or more for services performed by persons not treated as employees, such as fees to subcontractors, attorneys or accountants
• Rent payments of $600 or more
• Prizes and awards of $600 or more that are not for services, such as TV show winnings
• Royalty payments of $10 or more
• Payments to certain crew members by operators of fishing boats
• Sales of $5,000 or more of consumer products to a person for resale anywhere other than in a permanent retail establishment
• Any payments from which federal income tax has been withheld under backup withholding rules
There are some exceptions. Form 1099-MISC is generally not required for payments: to a corporation; for merchandise, telephone, freight, storage and similar items; of rent to a real estate agent or a tax-exempt organization; to the United States, any individual state, the District of Columbia, a U.S. possession or a foreign government.
Third-party payers must provide a copy of the form to the payee on or before Jan. 31 following the end of the tax year. For example, for services rendered during 2006, a payer must provide the form to its payee by Jan. 31, 2007. The payer must also file Forms 1099-MISC with the IRS by Feb. 28 (March 31, if filing electronically).
To learn more visit:
http://www.irs.gov/newsroom/article/0,,id=161511,00.html
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