It is December 31, 2012. Assuming all of the amounts are greater than $600 for the year, which of the following vendors/payees would your organization be required to send a Form 1099-MISC to? (circle all correct answers)
(a) Your computer repair guy who has a sole proprietorship business.
(b) Your grant writer. She is paid as an independent contractor.
(c) J&J Janitorial Services . They provide you with monthly janitorial services.
(d) Staples. You buy all of your office products from them.
(e) Jason’s Deli. Each month your organization buys lunch from them for the Board meetings.
(f) Best Buy. This year, you replaced 3 of your organization’s computers and purchased them from Best Buy.
(g) None of the above.
(h) All of the above.
CORRECT ANSWER: H
Currently, the general rule is that you complete and mail a Form 1099 for each calendar year to individuals or companies that are not incorporated for amounts you have paid them for services, if that amount is $600 or greater for the year. Embedded in the health care reform bill, is a new rule on this. Beginning in 2012, you will have to complete Forms 1099 for ALL payees, whether for goods or services, and whether to individuals or corporations.
So you can look at this in two different ways…
(1) This is so much simpler than before! Now I don’t have to figure out each year who I have to send the 1099 to and who I don’t. I will just prepare Forms 1099 for any payee to whom I paid $600 or more.
(2) What??!!? You mean I will have to get W-4 forms completed from all of those companies? I have to develop a system or process that will enable me to print all of these Forms 1099? I might have to pay someone to do this for me? What a headache!
If your response is #2, the good news is that there are currently efforts to repeal this part of the legislation. We will have to wait to see what happens….
By Colette Kamps, CPA