TAX ANNOUNCEMENT - FORM 1099 REQUIREMENTS

Dear Tax Clients:

Two new requirements began in 2011 that concern issuers of Forms 1099 that we would like to bring to your attention. Generally, any trade or business that makes payments in the course of that trade or business of interest, rents, compensation, remuneration for services, annuities, etc., aggregating $600 or more for the year to a single (unincorporated) payee is required to report the payments to the IRS and to the recipient of the payments by filing Form 1099.

This reporting requirement generally does not apply to payments to corporations. However, the 1099 reporting requirements do apply to payments made to corporations for attorneys' fees, and to amounts paid to corporations providing medical or health care services.

In light of these two new requirements, we are recommending that our clients review their payables for 2012 to determine if payments were made aggregating $600 or more to corporations for attorneys’ fees and/or to corporations providing medical or health care services. If so, Forms 1099 will need to be generated to those specific corporations.

Moreover, if you want to protect your income tax deductions, you must properly transmit your Forms 1099 to the IRS by February 28, 2013.

Finally, it is a common misconception that if a taxpayer does not receive a Form 1099 or if the income received from a payer is under $600 for the year, the income is not taxable. This is not true. There is no minimum amount that a taxpayer may exclude from gross income. All income earned is fully taxable and must be reported regardless of whether or not you receive a Form 1099.

Please let us know if you require assistance in generating your Forms 1099, or if you have any compliance questions regarding the Form 1099 requirements.

Best regards,
Rollins and Associates, P.C.