There is an infinite amount of forms intended for the various tax reports to the U.S. Tax Authority. Each form has a numbering and a unique purpose, intended for various matters. Many may find themselves completely helpless in light of the many different instructions and forms. One of the most common and frequently used forms is Form 1099.
However, there is a lack of clarity about his goals, who should fill them, who should submit them, and for what purpose. To make it easier for you to understand, in the article before you we will try to clarify all these matters – we will explain what form 1099 is, what are the different cases for which it is intended, and who should submit it.
Form 1099
Despite the prevailing perception, Form 1099 is not one type of form, but a series of forms called 1099 that has a large number of subforms. The aforementioned series of forms is intended for reporting money transfers within a commercial framework between individuals or entities (whether via bank transfer or check).
Each of the sub-forms is dedicated to a specific type of receipt/payment – transfer within the framework of dividend distribution, transfer within the framework of an unemployment benefit, transfer within the framework of payment for service, and so on. Each form is called 1099 and is changed by one of the English letters (for instance 1099A).
Information contained in the form
The forms of these series include basic details about the transfer: details about the transferring and receiving parties, the reason for the transfer, and the amount of money transferred.
Issuing the form and submitting it to the Tax Authority
The form is issued by the transferring party, a copy is then submitted to the recipient of the transfer and also to the tax authority. Both the transferring party and the receiver submit the form to the tax authority so that the authority can eventually cross-reference the information. The form must be submitted/obtained by January 31 of the following year.
The importance of these forms
Since the data in the forms is cross-referenced by the Tax Authority, it is of great importance to issue accurate 1099 forms to suppliers and to receive accurate forms from customers. Failure to submit the forms or inaccurate submission may expose the applicant to tax audits, fines, and other sanctions.
Types of 1099 forms
As mentioned above, there is a variety of 1099 forms with a specific designation according to the nature of the payment /receipt. Here are some commonly used forms that you should know – whether as paying customers receiving the forms from a transferring party or as the transferring party issuing the form:
1099 MISC – Miscellaneous Income
Reporting form for transfer of payment for receipt of commercial service. The form will be submitted to the recipient and the Tax Authority as described above, given compliance with the cumulative conditions below:
- The payer is an American citizen, a local corporation, or a foreign citizen who reports to the U.S. Internal Revenue Service.
- The recipient is an American citizen or local corporation.
- The amount of the transfer exceeds $ 600 or $ 10 where appropriate from royalties.
- The payment is for: rent, professional service fees, prizes and winnings, attorney’s fees, health insurance payments, other income that is not typical to normal business.
It should be noted that the form will not be issued where the transfer is private and not part of a commercial relationship, nor will it be issued for a salary reported by other means.
1099DIV – Dividends and Distributions
A Form that reports a dividend distribution to a shareholder that is higher than $10 a year. The corporation will fill out and submit this form concerning each shareholder. If tax is deducted from the dividend, the form will also include information about the amount deducted.
Interest Income – 1099INT
A form that reports income derived from an interest in an amount greater than $10 a year and/or where withholding tax is deducted from the payment.
Proceeds from Real Estate Transactions- 1099S
A form for reporting transfer due to executing a real estate transaction (buying/selling land or a taxable property) carried out with the help of a realtor. The form is issued and submitted by the realtor who makes the payment and the actual management of the transaction by the buyer. For the most part, these are TITLE companies, mortgage banks, lawyers, or realtors in their profession.
The form will not be submitted where it is a non-taxable asset, a tax-exempt entity, or the transfer of rights that does not recognize or foreclosure that fully pays off the debt.
Certain Government Payments – 1099G
Government agencies will issue this reporting form for unemployment benefit payments, refunds, and tax deductions, and state taxable grants.
Summary words
Forms 1099 are reporting forms of commercial money transfers between individuals and entities.
MasAmerica’s team is experienced in the relevant taxation and halo provisions and will be happy to assist in filling out the forms and submitting them.
This should not be seen as legal advice. It is recommended to consult with Masamerica’s team before any action.
