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The 1099s for 2012 must be provided to the independent contractor no later than January 31 of 2013. We can issue the 1099s for you.

The following are the exceptions to the above rule:

1. You do not need to issue a 1099- MISC. to a corporation unless the service provider/corporation is either an attorney or a medical practitioners.

Example 1: If your engineer is incorporated, you do not need to issue him or her a 1099- MISC. However, if he or she is not incorporated, then you do.

Example 2: Whether your attorney or your medical practitioner is incorporated or not, it doesn’t matter, you still need to issue a 1099- MISC. to your attorney and/or medical practitioner if you paid them $600 or more during 2012.

Furthermore, the IRS is now matching 1099-MISC. issued by third parties to attorneys and medical practitioners against the attorney’s or medical practitioner’s gross income that he or she reports on his or her income tax return. If the total of the 1099-MISCs. reported on behalf of the attorney or medical practitioner is more than the gross income reported by the attorney or medical practitioner, an audit may be in the works.

2. Landlords are not required to issue any service provider that they use a 1099- MISC. However, if the landlord is a real estate professional, then he or she is required to issue a 1099- MISC. to the service provider unless the service provider is incorporated.

Example 3: Raymond is a dentist and owns three rental properties. He is not a real estate professional. He does not need to issue a 1099- MISC. to the service providers that he uses during the year for his rental properties such as the gardener, plumber, etc. However, as a dentist, he is required to issue a 1099- MISC. to those service providers that provide a service to his dental practice that are not incorporated and received $600 or more during the year.

Example 4: Danny owns three rental properties and that is all he does. He is considered a real estate professional. He does have to issue a 1099-MISC. to every unincorporated service provider that he uses during the year that he paid $600 or more to.

It is not uncommon to have a repairman out early in the year, pay him less than $600, and then use his services again later and have the total for the year exceed the $600 limit. As a result, you overlook getting the information needed to file the 1099s for the year.

Therefore, it is good practice to have individuals who are not incorporated complete and sign the IRS Form W-9 the first time you use their services. Having a properly completed and signed Form W-9s for all independent contractors and service providers eliminates any oversights and protects you against IRS penalties and conflicts.
IRS Form W-9 is provided by the government as a means for you to obtain the data required to file the 1099s for your vendors. It also provides you with verification that you complied with the law should the vendor provide you with incorrect information. We highly recommend that you have a potential vendor complete the Form W-9 prior to engaging in business with them. The form can either be printed out or filled onscreen and then printed out.

Furthermore, there are other 1099 filing requirements such as Form 1098, Form 1099-INT, Form 1099-DIV, Form 1099-S and etc. that you may be required to file.

Failure to file returns or to include correct information can result in a fine of up to $100 per information return to a maximum of $500,000 for a small business.

To avoid the fines/penalties, information returns are to be given to payees by January 31, 2013, and copies are to be mailed to the IRS by February 28, 2013. The IRS due date is extended to April 1, 2013, for electronically filed returns.

If you need help in determining who needs to be issued a 1099, what kind of 1099 needs to be issued or need help filing 1099s, please contact us. We can do it for you.

The above technical reference is provided as a courtesy to the reader by David Silkman, CPA, MST, Broker, Silkman & Associates Accountancy Corporation and SilkRoad Realty, Inc. The information is technical in nature, may not include all the details on a particular subject and may require review of the reader’s circumstances by a professional. You should consult with your tax advisor.

David S. Silkman is a CPA, has a Masters in Taxation (MST) and is a licensed real estate broker. He specializes in real estate tax laws and accounting. If you have any questions, please do not hesitate to call him at 310.479.7020 x301, email him atdavid@saacpa.com or visit www.saacpa.com orwww.SilkRoadRealtyInc.com. Thank you.