SALEM, Ohio — If you are a farmer and want to write off the cost of the custom hay baling you had done this summer, you may want to get your hands on a 1099 tax form from the Internal Revenue Service.
Dave Miller, an enrolled agent with the Wright Law Co. in Columbus, said he was preparing some tax forms and noticed a new question on the Schedule E and F forms.
New question
— The question asks if any payments have been made in 2011 that would require taxpayers to file a Form 1099.
The 1099-misc. form must be filed if at least $600 in rents, services, prizes, medical and health care payments and other income payments were made in 2011.
Hauling freight is exempt from the 1099 requirement, which means custom livestock hauling or grain hauling is not required to be reported under the 1099 forms.
Other services that require the form include someone painting the barn, hoof trimmers or certified crop consultants.
1099 forms are not required for the purchase of feed, seed, fertilizer or equipment parts.
“And if less than $600 is spent, then there is no need for a 1099 form,” Miller said.
Be aware
— The questions on Schedule C, E and F are the following:
• Did you make any payments in 2011 that would require you to file Form(s) 1099?
• If “Yes,” did you or will you file all required Forms 1099?
Miller said those two questions could cost farmers money if they are not careful in keeping their books.
If a farmer fails to file a 1099 form, it could result in a $100 fine per form. If the IRS can prove that it was willful neglect in failure to file the forms, then the fine is increased to $250 per form.
“Unfortunately, this could be something that small farms try to ignore, but it could be a costly mistake,” said Miller.
Requirement. Miller said the 1099 requirement is part of the move by Congress to help pay for the healthcare reform passed.
Unless a business is incorporated, a 1099 form is required for all service providers.
“Farmers need to ask the business doing the service for their Social Security number unless they are incorporated,” Miller said.
Miller said limited liability corporations are not necessarily excluded from the 1099 forms. He explained a limited liability corporation can be formed and not be incorporated, which means the forms are necessary.
Miller added that if a farm owner garners more than $600 in rent, then a 1099 form for each renter is needed. Farmers also need to talk to their landlords about 1099 forms.
Tax gap
— The forms are reportedly an attempt to fill the tax gap. This is the figure that should be collected in taxes compared to what is collected in taxes.
The 1099 form acts like a third person reporting income, because the IRS gets a copy of it, which helps to push taxpayers to report all of their income.
1099 dates to remember
— 1099 forms have to be received by service providers by Jan. 31, 2012
— 1099 copies have to be submitted to the IRS by Feb. 28, 2012
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It is my understanding that the requirement discussed in this article to file 1099 misc was repealed by HR 4-the Comprehensive 1099 Taxpayer Protection and Replacement of Exchange Subsidy Overpayments Act of 2011. Am I wrong?
Only part of the 1099 misc. was repealed. My understanding from my sources is that the part requiring farmers to report purchases under $600 (for example a purchase made from the farm store) was repealed. It remains that anything over $600 considered a service must be reported through a 1099. For example, custom harvesting or baling.