Scrutinizing Vendor Payments for 1099 Eligibility
After running the initial 1099 Summary Report, you'll want to make certain you didn't miss anyone.
While viewing the results of your 1099 Summary Report, adjust the settings to provide more payment details:
a. Change settings from default to show "All Vendors"
b. Change settings from default to show "All Allowed Accounts"
c. Ignore Thresholds
While scrutinizing your vendor list, it might be a good idea to reference the 1099 Instructions again. In particular, review the following common items:
- Rents: The most common 1099 payment is for the rent paid for any business space or related equipment. Rent for living space does not constitute a 1099 payment.
- Non-employee Compensation*: Any compensation to a non-employee (independent contractor) in excess of $600. Also includes fees, commissions, prizes, and awards for services performed as a non-employee. Examples: professional fees, referral fees, sales commissions paid to, exchange of services, taxable fringe benefits.
- Gross proceeds paid to an attorney: This does not constitute professional or lawyer fees. These are, for example, settlements paid to an attorney.
- Royalties: Any royalties received from oil, gas, or mineral rights will need to be recorded as 1099 payments. Concurrently and income from copyrights or patents will also need to be recorded.
- Other Income: Payments received as beneficiary of deceased employee, prize/awards, taxable damages, Indian gaming profits, or other similar taxable income.
- Fishing boat proceeds
- Taxable fringe benefits
- Substitute payments in lieu of dividends or interest
- $5,000.00 or more in direct sales of consumer products to a buyer.
- Crops insurance proceeds
- Excess golden parachute payments
- Section 409A Income/Deferrals: 409A income or deferrals refers to compensation that is paid by a service recipient to a service provider.