Understanding the New Form 1099

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Last week I mentioned that there are changes in 1099 reporting this year.  1099s can be tricky in general not to mention there is a lot involved in the changes, so I thought I would use this week’s blog post to expound a little on 1099s.  This is especially helpful for you ladies who own your own business.

There a couple of new rules to be aware of.  First, investment companies are now required to report the cost of investments, such as stocks, sold during the year on a 1099B.  This “basis” will help the company and the IRS when reporting investment sales. 

The second change is the addition of a form 1099K.  If you or your business have a merchant account and take payments from people by credit or debit card, the credit card processing company is now required to report those transactions to the IRS.  If you receive a 1099K this year, make sure you give it to your tax preparer, as there is now a special line to record it on.

Now that we have the new rules out of the way, let’s review who receives a 1099.  Form 1099s are sent to individuals, businesses, and/or attorneys who have been paid $600 or more by another company.  For example, if a company pays an independent web designer $500 a month to maintain their website, the company would need to send the web designer and the IRS a Form 1099 with the total amount you paid them.  So in this case the 1099 would report $6000.

There is one more instance where a 1099 is given, and that is for owners of rental properties who use property managers to maintain their rental properties.  The property managers must send the property owners a 1099 reporting the rental income from the properties—as long as the income was $600 or more.

1099s are an important tax document and they must be submitted to the IRS and sent to the respective recipients by a certain due date each year, which is January 31^st.

I hope this has helped you understand 1099s a little better.  If you have any questions, post them below! I’d love to answer any questions you have!

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