Condo Media - January 2021 - 12

Asked & Answered

Form 1099-Misc

What an Association Board Should Know to Avoid Penalties
As a new board treasurer,
I'm looking for guidance on filing
Form 1099-Miscellaneous (1099-Misc).
Specifically, who do I send Form 1099Misc to, how do I fill out the form,
and when is it due? Also, what are the
penalties if I don't file Form 1099-Misc?

While most people are aware that income tax returns
must be filed annually, many, especially those new
to the accounting function of their community, will
find that information reporting requirements have
different rules and deadlines. One common information reporting requirement for associations is the
filing of Form 1099-Miscellaneous (1099-Misc),
which, according to Internal Revenue Service (IRS)
instructions, must be furnished to the vendor by
Jan. 31 and filed with the IRS by Feb. 28 (Mar. 31,
if filing electronically).
Filing Form 1099-Misc fulfills the requirement to
report to the IRS what your association paid certain
vendors during the year. Eric Fudeman, CPA at Bloom
Cohen Hayes, LLC, explains that " typically, you report
annual payments over $600 the association made to
a vendor who provided services to the association.
Examples of such vendors would be a management
company, a plumber, an electrician, a landscaper,
or a financial services professional. "
The IRS uses this reporting to track income received
by businesses and individuals. The IRS can then match
the income amount reported by the association with
the total income reported by the vendor on their tax
return and see if there are any discrepancies.
Fudeman says if the association paid a vendor
$600 or more for services during the year and
that vendor is not incorporated (not a C-Corp or
S-Corp), then the vendor may need to receive a
1099-Misc from the association. He adds that if
a vendor only sold products or supplies to the association, then it is not required to file a Form-1099.
Most associations will issue Form-1099 to vendors
for services performed.

12

CONDOMEDIA January 2021

Fudeman notes it is good practice to request that
vendors complete and return a Form W-9 (a one-page
PDF) to the association when they are engaged to
perform services. The W-9 collects basic information, which you will need when you file the 1099 in
January, like vendor name, address, type of entity
(whether they are incorporated), and the vendor's
tax identification number.
If you are filling out the 1099 yourself, be sure
to refer to the IRS instructions.
PENALTIES FOR NOT FILING
Associations need to be vigilant about issuing the
1099-Misc because failure to file can result in costly
penalties. Because the penalties can add up if you fail to
issue the form on time, Fudeman recommends " using
a professional service provider to complete the 1099s.
Some management companies, as well as CPA firms,
will complete and send out 1099s. Even QuickBooks
has an add-on service for completing and sending
1099s. I would strongly recommend hiring a professional to handle the responsibility of filing 1099s. "
Fudeman warns, " Failure to file 1099s in a timely
fashion could result in penalties in the thousands
of dollars to the association. Hiring a professional
can help you avoid penalties and help determine if
a vendor, such as a handyman who is on site every
day, should actually be considered an employee and
receive a W2 instead. There are payroll tax penalties
to consider in this situation. " For anyone who wants
to read up on the 1099-Misc, Fudeman says the IRS
website is a great place to go for details.



Condo Media - January 2021

Table of Contents for the Digital Edition of Condo Media - January 2021

Contents
Condo Media - January 2021 - Cover1
Condo Media - January 2021 - Cover2
Condo Media - January 2021 - Contents
Condo Media - January 2021 - 2
Condo Media - January 2021 - 3
Condo Media - January 2021 - 4
Condo Media - January 2021 - 5
Condo Media - January 2021 - 6
Condo Media - January 2021 - 7
Condo Media - January 2021 - 8
Condo Media - January 2021 - 9
Condo Media - January 2021 - 10
Condo Media - January 2021 - 11
Condo Media - January 2021 - 12
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Condo Media - January 2021 - 25
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Condo Media - January 2021 - 42
Condo Media - January 2021 - 43
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Condo Media - January 2021 - 45
Condo Media - January 2021 - 46
Condo Media - January 2021 - 47
Condo Media - January 2021 - 48
Condo Media - January 2021 - Cover3
Condo Media - January 2021 - Cover4
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