Form 1099-MISC is a critical tool the IRS uses to ensure compliance with U.S. Treasury Regulations.  Form 1099-MISC is critical because it tells the IRS, just like Form W-2, that the recipient has received income that should appear on their tax return.  If the income is not reported on the recipient’s income tax return, the IRS has good reason to believe that income is understated on that return.  Unfortunately, the IRS also knows that the most significant, single cause of underreported income – and unpaid tax in the U.S.—is businesses and organizations not Filing Form 1099-MISC as required.  Form 1099-MISC noncompliance is so rampant, in fact, that Congress has doubled penalties twice in the past few years to encourage the proper and timely filing of Form 1099-MISC.  For more information on Congress and these penalties, read our article, Form 1099-MISC Noncompliance (Can Literally Destroy Your Business).     

Unfortunately, the assessment of these record-high penalties on businesses and organizations has done little to reduce a great deal of confusion surrounding Form 1099-MISC.  Take, for example, the seemingly simple question: Who is required to file Form-1099-MISC?   Surprisingly few businesses and organizations know whether or not they are even required to file Form 1099-MISC, let alone how and when to file it!   For this reason, this article will draw upon information provided in our 1099-MISC Basics Course to explain what businesses and organizations are required to file Form 1099-MISC. 

1099-MISC Confusion:  There are two primary reasons so few understand who is required to file Form 1099-MISC.   One reason is caused by the IRS in its instructions to Form 1099-MISC.  The other is rooted in a misunderstanding resulting from the fact that the types of entities required to receive Form 1099-MISC are vastly different than those required to file (send) Form 1099-MISC –deliver a copy to the recipient (payee) and the IRS.  This is a complex topic covered extensively in our course 1099-MISC Basics.

The confusion surrounding IRS instructions to Form 1099-MISC, however, is straightforward.   These instructions state, in a bold-type heading regarding who must file, that Form 1099-MISC reporting applies only to “Trade or Business Reporting.”  Logically, this leads many to assume that if their organization is not a trade or business, they are not required to file Form 1099-MISC.  Unfortunately, this assumption is incorrect.  Read a little further and the instructions go on to list a litany of non-business organizations considered businesses for purposes of the 1099-MISC rules!  

Who Must File Form 1099-MISC: The basic answer is that the vast majority of businesses and organizations are required to file 1099-MISC Forms when they make payments that require Form 1099-MISC (generally $600 or more paid for services during the year). Here’s a quick list:

  • Sole Proprietorships
  • Partnerships
  • S Corporations
  • C Corporations
  • LLCs
  • Federal Government
  • State Government
  • Local Government
  • Credit Unions
  • 501(c) Nonprofits & Associations
  • Church’s 
  • Homeowner Associations
  • Religious Associations 501(d)
  • Fraternal Organizations

Who is not required to file Form 1099-MISC: Considering the many types of organizations required to file Form 1099-MISC, it might be easier to list those that are NOT required to File Form 1099-MISC.

  • Personal households (be careful with individuals who may qualify as household employees)  
  • Payments related to hobbies
  • Most Rental Real Estate owned by individuals (not managers) not rising to the level of a business
  • Most estates not partaking in business

Do you still have questions?  Just realize that you should file Form 1099-MISC and need help?  Want to make sure you are filing Form 1099-MISC correctly?  If so, check out Overnight Accountant’s Form 1099-MISC Basics Course.   Does your staff need training in Form 1099-MISC?  Form 1099-MISC Training Edition is what you need.    Both courses teach everything you need to know about common payments requiring Form 1099-MISC.   They also provide step-by-step instruction on how to complete and file Form 1099-MISC.   Check them out!

All courses and articles are for informational purposes only and do not constitute tax advice. Taxes are complicated - do not act on course information without consulting a professional. Always refer to treasury regulation before making any tax decision. Read the full disclaimer.

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