The requirements for preparing and filing information returns, such as Forms 1099 and W-2, apply to all businesses, including owners of rental properties. Current IRS Regulations require that information returns be issued to all non-corporate businesses that provide goods or services, to your business or rental activity, aggregating $600 or more during the year. The IRS recently concluded under Reg. 1.6041-3 that LLC’s are not corporations and should be issued a Form 1099.
Some of the common Forms 1099 are as follows:
- Form 1099-DIV is issued to shareholders of corporations who received distributions during the year, such as dividends, capital gain distributions, or non-taxable distributions of $10 or more, or in the case of liquidating distributions of $600 or more.
- Form 1099-INT is issued to persons who were paid $10 or more in interest during the year.
- Form 1099-MISC is issued for payments made during the year, totaling $600 or more, for services rendered to a business entity by any company or individual that are not treated as its employees, and are not incorporated. This also includes payments to a landlord for rental payments, payments made to an attorney, prizes and awards.
- Form 1099-R is issued for payments made to an employee receiving a distribution from the company retirement plan.
- Form 1099-S is issued for the amount of gross proceeds received from the sale or exchange of real estate or certain royalty payments.
A business is required to include the following information on their employee’s Form W-2, which is often overlooked:
- 3rd party sick-pay, including payments an employee receives from the State’s Temporary Disability Insurance Program.
- Auto allowances and the value of an employee’s personal use of a company provided automobile.
- The cost of group life insurance payments on the amount of insurance that exceeds $50,000.
The due date for providing the recipients with these information returns is January 31st of each year. The IRS recently increased the penalty from $50 to $250 per information return, with no maximum on the penalty amount for non-compliance. Best practices suggest that businesses obtain a copy of Forms W-9 from each non-employee that they make payments to, including corporations. It’s only a matter of time before the IRS lowers the reporting threshold to an amount below $600 and also removes the corporate exemption.
The reporting requirements are complex. If you need assistance in complying with the IRS regulations, please contact our office at (908) 782-7900 or email firstname.lastname@example.org.