Form 1099 Rules for Construction Contractors

Form 1099 Rules for Construction Contractors

By Houston TX CPA Jim Trippon, on the web at www.CPAHoustonTX.com

One problem area for many construction contractors is the proper completion of Form 1099. As a Houston CPA whose father was a custom homebuilder, I am very familiar with this issue.

Construction contractors have to prepare Form 1099-MISC for each subcontractor to whom payment in the previous calendar year exceeds $600. Form 1099-MISC is filled in for the previous year after January 31. Since this form has tax implications it has to be filled properly. We have more information on this topic, and additional articles, at our website www.CPAHoustonTX.com. Here is a summary of what you need to know:

Each Form 1099-MISC should include payer and payee information. Payer information consists of Employer ID Number, Business Name and Address. It should be noted that in the case of Form 1099-MISC, the main contractor is the employee Vis a Vis his subcontractors. In the case of payee Social Security number or Federal EIN has to be inserted in the appropriate column.

The payment amount columns have to be carefully filled since there are numerous options. In case of subcontractors the appropriate category is ‘other income’. Box 4 should be used for entering the amount of federal income tax withheld. This is important because the subcontractor would be filing his income tax returns based on this information.

Section 409A deferrals and income, which refers to non-qualified deferred compensation plans, has to be filled in box 15. Under State and local information you must provide the amount of state tax withheld and other information with respect to the State. One has to remember that if two or more States are referenced, Form 1099-MISC is to be prepared for each State separately. The logic behind the requirement is obvious since each form is to be separately provided to the appropriate state.

Once all the information is filled in appropriate columns in Form 1099-MISC, the payer or main contactor should once again compile and provide all information in Form 1096 which must be sent to IRS. Five copies of each Form 1099-MISC should be made for distribution to the Internal Revenue Service, State tax department, two copies for the subcontractor (to file for Federal and State authorities) and one copy for record.

Filling Form 1099-MISC is important because the failure of the hiring contractor to properly filer these forms may result in the hiring contractor paying tax for their subcontractors. The 1099 form contains information about both federal and State taxes and is used to link the tax payments of both the payer and payee. The Federal tax ID and State tax ID should therefore be filled correctly.

About the Author: Jim Trippon CPA is the founder of J.M. Trippon & Company, PC a CPA FIRM in Houston, Texas that works with Houston General Contractors and Subcontractors. Jim was born into a construction family (his father was a custom homebuilder) and Jim grew up pounding nails before he ever got his first drivers license.

For more information, or for help with preparing accounting or tax reporting for your construction business, from a CPA who knows the business inside out, please contact Houston TX CPA Jim Trippon at 713-661-1040 or visit our website at www.CPAHoustonTX.com

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