New Deadline for Reporting Non-Employee Compensation on Form 1099

By: David Marrison, Associate Professor & Extension Educator

There is a new change from the Internal Review Service which farmers need to be aware of in regards to the Form 1099. New this year is a provision that if the Form 1099s is being issued to report “Non-Employee Compensation” it is due both to the recipient and to the IRS by January 31, 2017.   The recipient due date has always been January 31, but taxpayers usually had until February 28 or in the case of e-filed returns March 31 to file with the IRS.  However, this is no longer true for those receiving a 1099 for non-employee compensation.  They are due to both by January 31 with no extensions.

A Form 1099 for “non-employee compensation” is generally required if the total payments for services exceeds $600 during the calendar year. Examples of this could be for hiring a neighboring farmer to harvest, spray, or plant your crops.  It could also include hiring a professional such as an accountant or veterinarian.  Reporting is needed for payments made to unincorporated businesses (ie. sole proprietorship or LLC) in excess of $600.  Generally payments to a corporation do not require a 1099 to be issued or payments made to LLC which have elected to be taxed as a corporation.  One exception that should be noted is that payments over $600 to an attorney, regardless of business entity (corporation or unincorporated), need to have a Form 1099-MISC issued.

Form 1099s are also used for report rent paid to landlords, royalty payments from gas wells, and for reporting crop insurance proceeds. For 1099s issued for these other reasons, they still must be to the recipient by January 31 but remain under the old filing deadline to the IRS of February 28 or in the case of e-filed returns March 31.  However, it is recommended that you file all of your Form 1099s at the same time.  This way you don’t forget to file the other forms by the later due date!

It is highly recommended that farmers obtain a Form W-9 from each business they purchase products and services from. This form provides the necessary information that allows you to process the Form 1099. Don’t guess on if the entity is a corporation or not.  The W-9 will indicate the type of entity.  You do not need to get a new Form W-9 each year, but it is a good idea to get them updated annually if you can.

It should be noted that payments paid for products do not require a Form 1099 to be filed. Therefore, when farmers buy fertilizer or feed, they are not required to issue a Form 1099.  However, if services are provided along with a product (ie. you hire for the spraying and the entity provides the spray chemicals) then a Form 1099 is required and the form should include the total payment made.

More information about 1099 reporting can be obtained at the Internal Revenue Systems website at: https://www.irs.gov/uac/about-form-1099misc.  And just a friendly reminder, if you miss the deadline or do not issue Form 1099s that are required, the penalty for EACH form 1099 not timely filed is $250 for not sending to the recipient and $250 for not filing with the IRS.

Click here to access the form 1099: https://www.irs.gov/pub/irs-pdf/f1099msc.pdf.

Leave a Reply

Your email address will not be published. Required fields are marked *