If Your Accounting Firm is Organized as a Partnership, IRS Requires 1099s for Fees Paid

The IRS requires businesses, self-employed individuals, and nonprofit organizations to issue Form 1099-MISC for professional service fees of $600 or more paid to accountants who are not corporations. Why is this important to Anders clients?

Prior to our recent merger, the legacy HRH firm was a professional corporation and as such, clients were not required to report payments made to the firm on Form 1099.  However, Anders, the recently merged firm, is a partnership and that changes the 1099 requirements.  Former HRH clients will want to take note that 1099’s must now be issued because the IRS requires 1099 reporting of accounting fees paid to a partnership.

For self-employed individuals, it is common practice to allocate portions of accounting fees to different schedules on an income tax return.  The IRS adds some complexity due to the fact that the business portion of the accounting fees requires 1099 reporting, while the personal portion is not reported.  This subject takes on added importance because the IRS now asks, on every business income tax form, whether you made any payments that require form 1099 and whether you filed the required 1099’s.  If you are self-employed and have a question about how your accounting fees are allocated, please ask your Anders tax advisor.

Also an added note for security:  Self-employed individuals who use their social security number can obtain a business federal ID number so that they issue 1099’s with the federal ID number instead of handing out their personal social security number.