SAN ANTONIO, Jan. 29, 2016 /PRNewswire/ -- Business owners often outsource jobs to contractors to help their business run smoothly. Properly tracking payments to service providers can be a tax compliance headache. The American Payroll Association, the financial industry's resource for Accounts Payable education and training, offers five 1099-MISC preparation tips to double check your tax reporting for 2015.
1. All non-corporate service providers must receive the Form 1099-MISC. Did you pay a service provider at least $600 for services during 2015? If so, you must provide Form 1099-MISC to them no later than February 1, 2016. If the provider is a corporation you do not have to provide Form 1099-MISC.*
*Owners 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. If you don't send all qualified service providers their Form 1099-MISC, you set yourself up for penalties.
3. Timing is everything. If you're sending Forms 1099-MISC to service providers by mail, make sure to send them out no later than February 1, 2016. If you send paper copies to the IRS, February 28 is the last day to submit them (March 31 if you file the forms electronically).
4. TIN truncation program. Payees' Tax Identification Numbers (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. Put your credit card to work for you. If you paid for contractor services with a credit card, debit card, or gift card, do not file the Form 1099-MISC. The bank or credit card company that made the actual payment will take care of it for you by sending the contractor Form 1099-K.
For additional tips and resources, visit www.americanpayroll.org.
SOURCE American Payroll Association