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Anyone who makes or receives a payment during the calendar year as a small business or self-employed individual must likely file an information return, such as 1099, with the IRS.

Taxpayers are not required to file information return(s) if either of the following circumstances apply:

  • The taxpayer is not engaged in a trade or business; or
  • The taxpayer is not engaged in a trade or business and
    • the payment was made to another business that is incorporated but was not for medical or legal services or
    • the sum of all payments made to the person or unincorporated business is less than $600 in one tax year

Some form of 1099, whether a 1099-MISC, 1099-DIV, 1099-INT, 1099-A, 1099-B, 1099-C, 1099-K, 1099-R, or 1099-S is required to be issued and filed in the following situations.

When Payment Is Made

If, as part of the trade or business, any of the following types of payments are made, then a 1099 must be issued.

  • Payments, in the course of a trade or business:
    • Services performed by independent contractors or others who are not employees of the business
    • Prizes and awards and certain other payments
    • Rent
    • Royalties
    • Backup withholding or federal income tax withheld
    • Crewmembers of your fishing boat
    • To physicians, physicians’ corporation or other suppliers of health and medical services
    • For purchase of fish from anyone engaged in the trade or business of catching fish
    • Substitute dividends or tax-exempt interest payments and you are a broker
    • Crop insurance proceeds
    • Gross proceeds of $600 or more paid to an attorney
  • Interest on a business debt to someone (excluding interest on an obligation issued by an individual)
  • Dividends or other distributions to a company shareholder
  • Distribution from a retirement or profit plan or from an IRA or insurance contract
  • Payments to merchants or other entities in settlement of reportable payment transactions – any payment card or third-party network transaction

When Payment Is Received

If, as part of a trade or business, a taxpayer receives any of the following types of payments, some form of 1099 must be filed.

  • Sale or exchange of real estate.
  • The taxpayer is a broker, and sold a covered security belonging to a customer.
  • The taxpayer released someone from paying a debt secured by property, or someone abandoned property that was subject to the debt or otherwise forgave their debt to the taxpayer.
  • The taxpayer made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

If you have questions about payments made to individuals, including any persons who are not your employees, call The Gartzman Law Firm at (770) 939-7710. Contact an experienced tax attorney today.