Form 1099-MISC is the most common tax form used to submit information for income paid to independent contractors. Failure to file this form can result in significant fines from the Internal Revenue Service (IRS). To determine whether you need to file a 1099 form, there are a number of questions to ask about the relationship with a contractor, and amount paid over the course of the previous year.

Determine what type of relationship you have with a person or company to decide if you need to issue a 1099 to document the relationship. Typically, you need to supply a 1099 to independent contractors, janitorial services, third-party accounts, third-party public-relations firms that are not on your regular payroll or any other company or worker that you paid for services that is not on your payroll.

Determine the total amount of money you paid the person or company over the year. If you paid more than $600 throughout the entire year for the services provided, you need to issue a 1099 form.

Check your records for payments made to attorneys. Attorney payments are documented using a 1099.

Check the type of corporation the third party is. For example, companies that are sole proprietors, partnerships or LLCs who received money from your company should receive a 1099. C corporations, S corporations or LLCs that are taxed as C or S corporations do not require a 1099.

File a 1099 if you are unsure. If you file one but did not need to, there is no harm done. However, if you fail to file one and one was required, you might be penalized heavily.

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