SAN ANTONIO, Jan. 26, 2015 /PRNewswire/ -- Many business owners turn to contractors to help make their businesses run smoothly. Properly tracking payments to service providers can be tax compliance headache.
The American Payroll Association, the financial industry's resource for AP education and training, offers five 1099-MISC preparation tips to double check your tax reporting for 2014.
1. Form 1099-MISC required for noncorporate service providers.
If you paid any service provider at least $600 for services during 2014, you must provide Form 1099-MISC to them no later than February 2, 2015. If the provider is a corporation you do not have to provide Form 1099-MISC.*
*You must provide Form 1099-MISC to sole proprietorships, partnerships and attorneys or medical service providers who do business as corporations. Discover if a service provider is considered a corporation by having them complete IRS Form W-9, Request for Taxpayer Identification Number and Certification.
2. Better safe than sorry! If you are unsure whether a Form 1099-MISC is required, go-ahead and send one. You can't go wrong sending more 1099s than are required, but you set yourself up for penalties if you do not send all qualified service providers their Form 1099-MISC.
3. Don't be late. If you're sending your Forms 1099-MISC to the IRS by mail, you must mail them no later than March 2, 2015 (February 28 is a Saturday). If you're sending an electronic file, you must file it by March 31 with the IRS.
4. TIN truncation program. The Taxpayer Identification Number (TIN) truncation pilot program is now a permanent feature of the 1099 reporting process. Payees' TINs (social security number or employer identification number) may be truncated on their paper or electronic copies but forms filed with the IRS must contain their full TINs. Under the truncation procedure, the first five digits are replaced with either asterisks or Xs: ***-**-1234 or XXX-XX-1234.
5. If you paid by credit card, skip the 1099. You're no longer required to send service providers a Form 1099-MISC if you paid for their services with a credit card, debit card, or gift card. The bank or credit card company that made the actual payment will send the contractor Form 1099-K.
For additional tips including an on-demand webinar, visit www.americanpayroll.org.
SOURCE American Payroll Association