Payments to any one contractor of $600 or more during the tax year in the course of your trade or business. The contractor must be an individual or partnership; payments to corporations currently do not require a 1099, except for noted below.
Professional fees to an attorney, doctor or other professional are included, as long as they are made in the course of your trade or business. Do not issue a 1099 for payments that are for personal expenses.
Payments to corporations are included only if they are for medical, health care, legal or fishing activities (yes, fishing!).
Payment of $600 or more in rent for office space, machines, equipment or land in the course of your trade or business will also require a 1099-Misc if the payment was made to an individual or partnership, not a corporation.
Payments include commissions, fees, interest, rents, royalties, annuities and any other type of compensation or income to a single recipient.
So what has changed from previous years? Simply the degree to which the IRS is cracking down on non-compliance. Penalties have gone up, according to accountant Bruce Phillips, a Xero Gold Partner and managing member of Harshman Phillips & Company.
"For 1099s required to be filed by January 31, 2013, the penalties for failure to timely file have increased. If your 1099s are filed less than 30 days late, the penalty is $30 per 1099. If your 1099s are filed more than 30 days late but before August 1, 2013 the penalty is $60 per 1099. If your 1099s are filed late on August 2, 2013, the penalty is $100 per 1099," he told Inc.
The IRS also has one more trick up its sleeve to keep you honest. "As of 2011 on all federal business tax returns a box was added asking whether any payments were made during the year that would require Form 1099 to be filed and a box was added asking whether or not you filed all required Forms 1099," Phillips explained. "When tax payers sign their tax returns, they are stating that, under penalties of perjury, to the best of their knowledge their tax return is accurate and complete. If all Forms I099 are not filed, they could be held liable in the event of an audit."
JESSICA STILLMAN is a freelance writer based in London with interests in unconventional career paths, generational differences, and the future of work. She has blogged for CBS MoneyWatch, GigaOM, and Brazen Careerist. @EntryLevelRebel