You still have IRS form 1099 obligations

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Editor’s note: The following article was written by Warren Schauer, Michigan State University extension business management educator and Larry Borton, MSU TelFarm

Congress recently repealed expanded Form 1099 reporting requirements that would have affected farmers. Previously, the law was passed that sought to expand the 1099 reporting requirements to include all payments from businesses aggregating $600 or more in a calendar year to a single payee. This was slated to begin in 2012 and it included payments to corporations (other than a payee that is a tax-exempt corporation) and other entities. This also included payment made for property, goods, and services.

A second 1099 reporting requirement was also repealed. The repealed law would have required landlords that paid $600 or more to any service provider to file a Form 1099. Landlords are now exempt from this 1099 reporting requirement unless they are in a trade or business.

Even with these requirements being nullified, there are other 1099 reporting requirements that farmers still have. A Form 1099-MISC is required for payments for rents and services that accumulate to $600 or more during the year or for royalties of at least $10. For example, if a farmer pays an independent contractor who is not a corporation $600 or more to pick rocks from the farm, then the farmer must provide Form 1099-MISC and submit a copy to the Internal Revenue Service. A 1099-MISC must also be given to landlords who are paid $600 or more in rent unless the landlord is a corporation. Normally payments for merchandise, freight and storage are not subject to Form 1099 reporting.

Increased penalties for failure to comply with these information requirements were not repealed. Starting January 1, 2011 these penalties are basically doubled. As an example the first-tier penalty (filed within 30 days of the due date) under IRC § 6721 for failure to timely file an information return was increased from $15 to $30, and the calendar-year maximum from $75,000 to $250,000. The minimum penalty for each failure to file an information return or intentional disregard increased from $100 to $250. 

Source: Michigan State University



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