Every business owner must report income and expenses on federal income tax forms. In addition to its regular tax returns, your business may have to issue and file federal 1099 forms to report payments your business has made to limited liability companies, partnerships and individuals that are not your employees.
What Is a 1099 Form?
A 1099 is a federal income tax form. Businesses are required to file a 1099 form with the Internal Revenue Service to report certain types of payments, such as rents, payments to independent contractors, and royalties. Generally, your business does not have to file a 1099 form for payments to corporations, but it may need to file 1099 forms for payments to individuals, partnerships and limited liability companies.
There are several types of 1099 forms:
- 1099 MISC is used to report payments to people who provide services to your business
- 1099-DIV is used to report dividends
- 1099-S is used to report real estate transactions
- 1099-INT is used to report interest paid
Do I Need a 1099 for an LLC?
There are several instances where a business must issue a 1099-MISC if it has made payments to a limited liability company. The most common ones include:
Rent - You must report any rental payments of $600 or more paid to an LLC. Those payments might include rent for office space, machines or equipment. However, you do not need to report rent that you paid to a real estate agent.
Nonemployee compensation - You must issue a 1099-MISC to report payments of $600 or more, made:
This might include a freelancer or independent contractor that you hired, or an LLC that provided services to your business, such as legal, accounting, cleaning or remodeling services. It could also include payments for repairs, such as auto repairs on a company car. If you paid the service provider less than $600 during the year, you’re not required to issue a 1099.
Royalty payments - If you paid $10 or more in royalties to an LLC on intellectual property such as trademarks, copyrights or patents, you must report those payments.
Products sold for resale - You must report direct sales of $5000 or more of consumer products, if they were sold to a buyer for resale anywhere other than a commercial retail location.
- to an LLC, sole proprietorship or partnership
- that was not your employee
- for services performed
Where to Get 1099 Forms
Tax form 1099 and instructions for filling out the form are available at no cost on the Internal Revenue Service website, www.irs.gov.
In addition, several commercial software providers offer 1099 forms, and paper forms are available at office supply stores and public libraries.
Where to Send a 1099 Form
You must fill out a separate 1099 form at the beginning of each calendar year for each individual, partnership or LLC that you paid in the previous year. Once you’ve filled out the forms, you must provide each of the listed individuals or entities with a copy of the form or a substitute form with all the same information.
The exact requirements for providing a 1099 to an LLC recipient vary somewhat depending on the type of 1099 form. A paper copy of the 1099-MISC typically must be sent to the recipient by the beginning of February. You can also issue a 1099 to an LLC electronically. For specific requirements, see the IRS guidelines for informational returns.
The 1099 must also be filed with the IRS. Filing deadlines are at the beginning of March for paper forms and the end of March for forms that are filed electronically.
If your business pays an LLC more than $600 a year for rent or services, you’ll need to issue a 1099 Form to the LLC and file it with the Internal Revenue Service. Issuing a 1099 isn’t difficult, but it’s an important part of your business’s accounting and tax preparation plan.
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