If you make or receive payments in your business, you may have to report them to the IRS on information returns. The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. You must give a copy of each information return you are required to file to the recipient or payer. In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. For more details on information returns and when you have to file them, see the General Instructions for Forms 1099, 1098, 5498, and W-2G.taxmap/pubs/p334-006.htm#en_us_publink100025075
Use Form 1099-MISC, Miscellaneous Income, to report certain payments you make in your business. These payments include the following items.
- Payments of $600 or more for services performed for your business by people not treated as your employees, such as fees to subcontractors, attorneys, accountants, or directors.
- Rent payments of $600 or more, other than rents paid to real estate agents.
- Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows.
- Royalty payments of $10 or more.
- Payments to certain crew members by operators of fishing boats.
You also use Form 1099-MISC to report your sales of $5,000 or more of consumer goods to a person for resale anywhere other than in a permanent retail establishment.
You must file Form W-2, Wage and Tax Statement, to report payments to your employees, such as wages, tips, and other compensation, withheld income, social security, and Medicare taxes, and advance earned income credit payments. For more information on what to report on Form W-2, see the Instructions for Forms W-2 and W-3. taxmap/pubs/p334-006.htm#en_us_publink100025077
The law provides for the following penalties if you do not file Form 1099-MISC or Form W-2 or do not correctly report the information. For more information, see the General Instructions for Forms 1099, 1098, 5498, and W-2G.
- Failure to file information returns. This penalty applies if you do not file information returns by the due date, do not include all required information, or report incorrect information.
- Failure to furnish correct payee statements. This penalty applies if you do not furnish a required statement to a payee by the required date, do not include all required information, or report incorrect information.
These penalties will not apply if you can show that the failure was due to reasonable cause and not willful neglect.
In addition, there is no penalty for failure to include all required information, or for including incorrect information, on a de minimis (small) number of information returns if you correct the errors by August 1 of the year the returns are due. (A de minimis number of returns is the greater of 10 or 1/2 of 1% of the total number of returns you are required to file for the year.) taxmap/pubs/p334-006.htm#en_us_publink100025079
You must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if you receive more than $10,000 in cash in one transaction, or two or more related business transactions. Cash includes U.S. and foreign coin and currency. It also includes certain monetary instruments such as cashier's and traveler's checks and money orders. Cash does not include a check drawn on an individual's personal account (personal check). For more information, see Publication 1544, Reporting Cash Payments of Over $10,000 (Received in a Trade or Business). taxmap/pubs/p334-006.htm#en_us_publink100025080
There are civil and criminal penalties, including up to 5 years in prison, for not filing Form 8300, filing (or causing the filing of) a false or fraudulent Form 8300, or structuring a transaction to evade reporting requirements.
Table 1-3. Going Out of Business Checklists
The following checklists highlight the typical final forms and schedules you may need to file if you ever go out of business. For more information, see the instructions for the listed forms.)
|IF you are liable for:|| ||THEN you may need to:|
|Income tax||□||File Schedule C or C-EZ with your Form 1040 for the year in which you go out of business.|
| ||□||File Form 4797 with your Form 1040 for each year in which you sell or exchange property used in your business or in which the business use of certain section 179 or listed property drops to 50% or less. |
| ||□||File Form 8594 with your Form 1040 if you sold your business.|
|Self-employment tax||□||File Schedule SE with your Form 1040 for the year in which you go out of business.|
|Employment taxes||□||File Form 941 (or Form 944) for the calendar quarter in which you make final wage payments. Note. Do not forget to check the box and enter the date final wages were paid on line 16 of Form 941 or line 15 of Form 944. |
| ||□||File Form 940 for the calendar year in which final wages were paid. Note. Do not forget to check box d, Final: Business closed or stopped paying wages, under Type of Return. |
|Information returns||□||Provide Forms W-2 to your employees for the calendar year in which you make final wage payments. Note. These forms are generally due by the due date of your final Form 941 or Form 944. |
| ||□||File Form W-3 to file Forms W-2. Note. These forms are generally due within 1 month after the due date of your final Form 941 or Form 944. |
| ||□||Provide Forms 1099-MISC to each person to whom you have paid at least $600 for services (including parts and materials) during the calendar year in which you go out of business. |
| ||□||File Form 1096 to file Forms 1099-MISC.|