Do you understand the rules for 1099s and if you will need to issue any?
As a self-employed independent insurance agent you receive 1099s for your work.
There are various 1099 forms but you most likely receive and issue Form 1099-MISC, miscellaneous income related to your business. Form 1099-MISC is issued to report various payments made in the course of your trade or business when at least $600 is paid for items such as: rents, services, prizes and awards, other income payments, and non-employee compensation.
The following are key items you need to know about Form 1099-MISC:
- Before you pay a 1099 related vendor, you should have them complete and provide you with a Form W-9, Request for Taxpayer Identification Number and Certification, for your records (this will give you needed information to file the potential 1099, e.g. their name, address, taxpayer ID number (TIN) and type of entity).
- If you do not have a valid TIN for a payee you may be required to withhold 28% of the payment and remit it to the IRS or be subject to a $100 penalty per incorrect form.
- Form 1099-MISC generally does not need to be issued to corporations (some exceptions).
- There are three copies of Form 1099-MISC: Copy A (red copy) for the IRS, Copy B for the recipient and Copy C for your records. You may also have a state or local copy.
- Forms are available from the IRS or your local office supply store.
- Form 1099-MISC is generally due to the recipient by January 31st and to the IRS by February 28th each year.
- If not sent electronically, Form 1099 is sent to the IRS with Form 1096, Annual Summary and Transmittal of U.S. Information Returns.
Helpful links and resources: 1099-MISC instructions, Example Form 1096 (must file original received from the IRS or office supply store), General 1099 instructions, and information on backup withholding.
Article written by Richard R. Dahl, a CPA and Senior Tax Manager with Security National Life Insurance. The content of this article is not intended as tax advice and cannot be used for avoiding tax penalties or promoting or recommending any transaction. Individual circumstances should be discussed with a qualified tax professional.Continue Reading