Every January, the Schneider Downs tax advisors receive many questions from clients related to the requirement to send or receive the Form 1099. In general, before 2020, any payment for services by a non-employee that is $600 or more should be reported on a Form 1099-MISC.
For the 2020 tax year, there is a new form to report this nonemployee compensation – Form 1099-NEC. Generally, the form is not required if the payments are made to a corporation (or an LLC that has elected to be treated as an S or C corporation) unless the payments are made to attorneys. Visit "IRS Issues New 1099 Forms for 2020" for a full discussion of the changes related to the Form 1099-NEC and Form 1099-MISC.
There are certain exceptions to the general rule and one of those exceptions is especially important to the transportation industry – Section 1.6041-3 (c) of the Income Tax Regulations exempt freight payments from 1099 information reporting. This exception applies to reporting of payments for truck, rail, ship and air freight services.
The most common follow-up question that we receive asks how the Form W-9 should be completed since no Form 1099 reporting is required. The instructions to the Form W-9 do not address this situation. The exemptions that can be listed on the form apply solely to backup withholding and FATCA (Foreign Account Tax Compliance Act) reporting. One option would be to complete the Form W-9 as usual, but to add the following statement to the top of the form: “Exempt from Form 1099 Information Reporting by Reg. 1.6041-3 (c).”
If you have questions on this or any other tax matters please contact us.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.