1099 Tax Software Blog

You receive a monetary gift as appreciation or a thank you for something you did.  Later, you receive a form 1099-MISC reporting that “gift” as other income to you and to the IRS.  What does the recipient, in this case, do?

Gifts or awards or prizes for services not performed count as other income.  If the gift is $600 or more, then its the payer’s responsibility to prepare and send a 1099-MISC reporting the value of the gift.  The taxpayer must report this amount as other income on Form 1040.

Many people say “but it was a gift”.  If the gift was $600 or more, the payer was legally obligated to report this.

The 1099-MISC has Copy A, B, C, 1 and 2.

Copy A is sent to the IRS along with the 1096.

Copy B is sent to the recipient and the recipient keeps that copy.

The payer or the business issues the 1099-MISC forms to vendors/contractors should retain Copy C.   You don’t have to print and store.  Instead, you can retain a PDF of copy of these forms.

Copy 1 is sent to the State Tax Department.

Copy 2 is to be filed with recipient’s state income tax return, when required.

The IRS says “any filer of information returns may file their returns electronically”. In the past (2008 and earlier), this was true. What has changed for the 2009 tax season is that you must have a Employer Identification Number (EIN) to apply for a TCC number and not a Social Security Number (SSN). The EIN is a unique nine-digit number used by businesses that operate in the United States. Any business entity (which includes, sole proprietors, corporations, partnerships, non-profit organizations, trusts and estates and government agencies) may apply for the TCC number which lets you then transmit returns electronically, but not individuals via a SSN.

Publication 1220 states on page 6 that “any person, including a corporation, partnership, individual, estate, and trust, who is required to file 250 or more information returns must file such returns electronically”. This 250 requirement applies separately to each type of form that you are required to file.

Lets consider two examples. Say you file 400 Forms 1099-MISC and 50 Forms 1099-A. Then you must file all of the Forms 1099-MISC electronically but you are not required to file Forms 1099-A electronically.

Of the 400 1099-MISC forms that you filed electronically, lets say you need to file 75 corrections. You can file those corrections by paper because the number of corrections for Form 1099-MISC is less than the 250 filing requirement. If you filed 250 or more Forms 1099-MISC corrections, then those must be filed electronically.