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Aspen Office
400 East Main Street
Aspen, CO 81611

Carbondale Office
0326 Hwy 133, Suite 200
Carbondale, CO 81623

New Rules For 1099 Reporting

The IRS is stepping up their emphasis on required reporting of payments on Form 1099. As you know, certain payments you make to vendors and service providers are required to be reported to the IRS, mostly on Form 1099-MISC. Effective for 2011, Schedules C and E of Form 1040 now require that you positively state whether or not you made covered payments. In addition, new for 2011, persons classified as real estate professionals are required to report certain payments related to their real estate activities.

New lines A and B address your required filing of Forms 1099 in 2011. If you made any payments in 2011 that would require you to file any Forms 1099 (including Form 1099-MISC), you must check the "Yes" box. This is significant because you sign the form under penalties of perjury, providing the IRS another avenue to assess penalties on taxpayers.

Also new for 2011 is the required reporting of rental property expense payments. This new requirement is scaled back from the original requirements, and now only applies to persons classified as real estate professionals. So, if you are a "real estate professional" and receive rental income from real estate, you will likely be required to report payments you made for rental property expenses.

As a reminder, Form 1099-MISC is required when you make payments in the course of your trade or business. Personal payments are not reportable. Generally, reporting is required when trade or business payments are for services, or when a payment is for a combination of goods and services.

Some payments are not required to be reported on Form 1099-MISC. Payments for which a Form 1099-MISC is not required include:

• Generally, payments to a corporation

• Payments for merchandise, utilities and telephone, freight, storage, and similar items

• Payments of rent to real estate agents or property managers

• Travel allowances paid to employees (but these may be reportable on Form W-2)

• Payments to a tax-exempt organization including tax-exempt trusts. (IRAs, HSAs, Archer MSAs, and Coverdell ESAs), the U.S. government, a state or U.S. possession

• Certain payment card transactions if a payment card organization has assigned a merchant/payee a Merchant Category Code (MCC) indicating that reporting is not required.

As a reminder, Forms 1099 are generally required to be provided to recipients by January 31, so the deadline is near!!! Also, remember that you use Form W-9 to request a recipient's name, address, and federal ID number so act fast. Please give us a call if you have questions about these requirements or any other topic.

Reese Henry & Company, Inc.
400 East Main Street Aspen, CO 81611
970.925 3771

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