What's New for 2011?

New Form 1099-K, "Merchant Card and Third-Party Network Payments", is now used by credit-card processors and other payment settlement entities to report the gross amount of transactions processed for businesses and other organizations. See the IRS website for additional information and specific instructions.

Information Reporting Highlights:

File Form 1099-MISC, "Miscellaneous Income", for each person to whom you have paid during the year:

• at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest;
• at least $600 in rents, services (including directors' fees), prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish you purchase from anyone engaged in the trade or business of catching fish;
• any fishing boat proceeds; or
• gross proceeds of $600 or more paid to an attorney; or
• direct sales made of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
• amounts where you withheld any federal income tax under the backup withholding rules regardless of the amount of the payment

Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations and government agencies are considered to be engaged in a trade or business and are subject to these reporting requirements. Payments made to partnerships, sole proprietorships, estates, and limited liability companies filing as partnerships are required to be reported on Form 1099-MISC. Be sure to report the payments in the correct Form 1099 box to avoid issues with the IRS (for example, Rents in Box 1).

Payments made to a corporation generally are not currently required to be reported, unless the payments are for medical and health care payments, fish purchases for cash, attorneys' fees, gross proceeds to an attorney, substitute payments in lieu of dividends or tax-exempt interest, or payments made by a federal executive agency for services.

These potential 1099-MISC recipients are often overlooked:

• auto mechanic/service stations that repair cars;
• professional service companies such as attorneys (including corporations), accountants, architects, contractors and engineers;
• plumbers, electricians, painters, carpenters, or office cleaners;
• independent contractors;
• equipment lessors and repair people; and
• office/company car lessors

File Form 1099-INT, "Interest Income", for each person:

• to whom you paid reportable interest of at least $10;
• for whom you withheld and paid any foreign tax on interest; or
• from whom you withheld and did not refund any federal income tax under the backup withholding rules, regardless of the amount of the payment.

Report only interest payments made in the course of your trade or business. You are not required to file Form 1099-INT for payments made to certain payees including but not limited to a corporation or tax-exempt organization. 

For all 1099 forms, the complete legal name and address of the recipient should be provided as well as the correct tax identification number (TIN) or Social Security number (SSN). This information can be obtained by having the recipient complete Form W-9, "Request for Taxpayer Identification Number and Certification". Payer's must provide their telephone number on the recipient's copy B of Form 1099 within the name and address section so that recipients may reach a contact person.

The IRS will assess penalties to the company/individual payer required to file information returns for the following reasons:

• failure to file by the due date;
• failure to include all information required to be shown, or including incorrect information on the return;
• if you file on paper when you were required to file electronically;
• you report an incorrect TIN or fail to report a TIN; or
• you fail to file paper forms that are machine readable.

Forms 1099 to recipients should be postmarked no later than January 31, 2012. The filing deadline for Copy A with the IRS is February 29, 2012 for paper filing and April 2, 2012 for electronic filing. If you are required to file 250 or more information returns, you must file electronically. IRS Publication 1220 provides instructions and requirements for filing electronically. Visit the IRS website for more information. 

You may request an automatic 30-day extension to file by submitting Form 8809, "Application for Extension of Time to File Information Returns", by the due date of the return. This extension request will only extend the due date for filing the returns with the government. It will not extend the due date for furnishing statements to recipients. No explanation is required for the extension; however, you must file Form 8809 by the due date of the returns in order to obtain the 30-day extension.

Louisville Metro 1099 Reporting:

Taxpayers making payments of $600.00 or more to recipients (other than employees) for services performed within the Louisville Metro, Kentucky area are responsible for maintaining records of those payments and filing Form 1099-SF with the Louisville Metro Revenue commission by February 28, 2012. If you opt to file the statements electronically, be sure to follow the specific instructions. The forms and instructions are available at www.metrorevenue.org. Other localities may have similar information reporting requirements.