I regularly get questions about whether or not to file 1099s. They are often surprised that more vendors and contractors need 1099s than they think. The list goes well beyond a freelancer you hire or a subcontractor you use.
In general, 1099s are required for payments over $600 made to individuals and partnerships – NOT corporations. The following is a list of common vendors you will need to issue 1099s for:
- Payments for services
- Payments for rent to landlords
- Payments for prizes and awards
- Payments to attorneys
The biggest exception to the general rules above is that a 1099 needs to be filed for attorneys and legal services even if they are a corporation.
Not sure if you should file a 1099? My theory is- if in doubt, file it. There is no problem if you file a 1099 you did not need to file. However, the IRS can hit you for up to $100 per 1099 you do not file if you needed to. Even worse, the IRS can disallow the corresponding deduction on your income tax return.