A typical question we receive is whether Form 1099-MISC needs be issued to a company/sole proprietorship for hauling freight?
Form 1099-MISC is generally required to be issued to each person to whom you have paid during the year in the course of your trade or business:
• At least $10 in royalties
• At $600 in rents, services, prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish you purchase from anyone engaged in the trade or business of catching fish, or, generally the cash paid from a notional principal contract to an individual, partnership, or estate
• Any fishing boat proceeds
• Gross proceeds of $600 or more paid to an attorney
• You made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment
However, there are exceptions, from issuing Form 1099 to the aforementioned list, we will highlight only two (2):
• Generally, payments to a corporation
• Payments for merchandise, telegrams, telephone, freight, storage, and similar items
If you paid a corporation $600 or more to do work for your company, and the payment wasn’t related to medical and health care payments, fish purchases, attorney fees, gross proceeds paid to an attorney, substitute payments in lieu of dividends or tax exempt interest, and payments by a federal executive agency for services then no 1099 needs to be issued.
If you paid an Owner-Operator $600 or more to haul freight for your company then the IRS, under Treasury Regulation §16041-3(c ), determined that NO 1099-MISC needs to be issued, however, household goods hauled by a moving company are not considered freight, thus a 1099-MISC needs to be issued.
See Drivers W2 or 1099 link for when to report and penalties if not reported.
If you would like to discuss this or any other U.S. tax or accounting matter, please feel free to call Gabriel at 773.269.6513 or email Gabriel.email@example.com.
We look forward to hearing from you.
Gabriel Wise, CPA MST
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