With limited exceptions, every person, corporate or otherwise, engaged in a trade or business who, in the course of that business, makes payments aggregating $600 or more to another person (e.g., an independent contractor) in a calendar year must file an information return (Form 1099-MISC) setting forth the name and address of the payee and the amount paid, and furnish a statement to the payee. Reportable payments are: rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits and income. A payor also has to report taxable prizes and awards of $600 or more (that aren't paid for services rendered) on Form 1099-MISC .

What this means in general is that if you are doing business (either as an individual, corporation, LLC/Partnership) and you pay an independent contractor $600 or more, than a 1099-MISC must be submitted not only to the individual or business that received the payment(s) but this information must be provided to the IRS as well. Most 1099's are issued to individuals working as independent contractors. Most corporations do not need to be issued 1099's unless they are attorneys. Partnerships and LLC's should be issued 1099's. Payments made for rent should also be accounted for and issued a 1099 to the landlord if the rent is for business.

The 1099-MISC is due to recipients by the end of January and is due to the IRS by March 1, 2010. If you do not issue a 1099-MISC to the recipients the deductions could be disallowed under IRS audit, so it is good business practice to do the following:

1) Whenever you enter into a contract with an independent contractor, you should have them fill out IRS form W-9. You retain this form for your records, and the information is needed when issuing the 1099's.

2) Keep track of how much you pay each independent contractor, as the $600 threshold for the reporting requirement is based on total payments throughout the year.