As a financial management company providing services to many startups, high-tech companies, and other international companies, we at Danoy work extensively with the American tax authority (IRS). One of the important forms in communication with the IRS is Form 1099, which is intended to report non-salary payments to any American entity.
What does this mean? The form refers to payments made to American companies or other service providers. For example, if one of the startups we provide CFO services to uses an American supplier and pays them via bank transfer, they will need to fill out Form 1099 so that the tax authorities are aware of the transfer. The paying party must fill out the form for any payment to an American supplier that exceeds $600. By the way, if the payment is made via credit card or an online payment system like PayPal, this report is not necessary as it is automatically handled by the system.
Another example of a situation where it is necessary to report to the IRS using Form 1099 is when receiving payments for interest, capital gains, and dividends exceeding $10.
As you can see, Form 1099 sometimes applies to the payer and sometimes to the recipient. It also applies to different types of payments and various financial entities (businesses, individuals, investors, institutions, etc.). Therefore, there are several types of Form 1099, each tailored to a different scenario. For example:
- 1099-MISC: Used to report miscellaneous income, such as payment for services, rent, royalties, and more.
- 1099-INT: Used to report interest income from investments, thus relevant for investors and financial institutions.
- 1099-DIV: Used to report dividends from investments.
- 1099-B: Used to report barter transactions.
- And more…
The American tax authorities require the submission of Form 1099 by January 31 of each year for the previous year. Therefore, as part of our role as the finance department for companies operating in the US, we at Danoy work according to a method we developed that allows us to be prepared in advance for the submission deadline of Form 1099 to the IRS.
If you would like us to help your company with the submission of Form 1099 and financial management, contact us.