If an association retains the services of an independent contractor, it is important to know when a 1099-MISC tax form must be provided to the contractor and filed with the Internal Revenue Service (IRS). Generally, IRS regulations require that businesses and organizations submit a Form 1099-MISC for any independent contractor paid over $600 for services during a given year. In IRS terminology, payments to independent contractors are commonly referred to as non-employee compensation.
If the following four conditions are met, a community association must report a payment to the IRS as non-employee compensation:
1. The association made a payment to someone who is not an employee;
2. The payment was made for services;
3. The association made the payment to an individual, partnership, estate, or in some cases, a corporation; and
4. The association made payments to the contractor of at least $600 during the year.
An association must report payments for services on a Form 1099- MISC. The IRS requires nonprofit corporations such as community associations to complete and submit the form. Therefore, the IRS will conclude that almost every payment made by an association to an independent contractor, which may include landscapers, snowplowers, attorneys, or roofers, is made for services.
Payments to corporations do not generally need to be reported on a Form 1099-MISC. However, when payments are made for professional fees to a corporation or LLC which is taxed as a partnership or sole proprietorship, a Form 1099-MISC must be provided to the entity and submitted to the IRS. For example, if your association pays our law firm over $600 in legal fees during the year, it should be providing and submitting a Form 1099-MISC. (Kaman & Cusimano’s Federal Identification Number is on the top of every billing statement.) If your association is uncertain as to whether a Form 1099-MISC should be issued, contact your association’s accountant.
If your association pays someone who is not your employee $600 or more for services provided during the year, a Form 1099-MISC must be provided to the contractor by January 31 of the following year and submitted to the IRS by February 28 if filed by paper or March 31 if filed electronically. The IRS encourages all businesses to electronically file their 1099-MISC forms.