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1099-MISCELLANEOUS Federal vs. State

It’s never too early to start thinking about your 1099-MISC preparations for 2018.  The deadline for filing is January 31.  This may seem like a long way out, but do yourself a favor and reduce the last minute rush of collecting W-9s by reviewing your vendors now.

Are you unsure about who will need a 1099?

Here are some general guidelines:

  • Vendors paid $600 or more for services in calendar year
  • Subcontractors
  • Independent Consultants
  • Rental Payments
  • Copyright, license and royalty fees

Important exceptions to note:

  • If a vendor is incorporated or tax exempt (with the exception of Legal Services), a 1099-MISC does NOT need to be provided.
  • If you pay your vendors by debit or credit card, this will be reported by the settlement company, not you.
  • Foreign vendors do not require a 1099-MISC. Request a Form W-8BEN for your records.

On top of this federal reporting requirement, Pennsylvania requires business owners to submit copies of 1099-MISC forms produced for PA residents to the Department of Revenue.  The state also recently enacted withholding requirements on the following types of payments:

  • Payments of Pennsylvania source non-employee compensation or business income to a non-resident individual or disregarded entity that has a nonresident member and is reported on a 1099-MISC.
  • A lessee of Pennsylvania real estate who makes a lease payment in the course of a trade or business to a non-resident lessor

3.07% withholding on these types of payments is optional for businesses paying less than $5,000 annually. If you are unsure about the annual payment amounts, Pennsylvania encourages taxpayers to remit withholding tax on all payments.  Payments of $5,000 or more are required to be withheld upon.   A PA-100 Pennsylvania Enterprise Registration Form must be completed in order to register and properly remit these taxes withheld through E-TIDES, the Pennsylvania’s online business tax filing system.

Please do not hesitate to contact the Outsourced Accounting Department at Stephano Slack LLC.  We are happy to assist you with all of your 1099 related questions.

Jessica Yothers

jyothers@stephanoslack.com

610-687-1600

June 12, 2018