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IRS 1099 FORM REGULATIONS FOR SETTLEMENTS AND LEGAL FEES

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IRS 1099 FORM REGULATIONS FOR SETTLEMENTS AND LEGAL FEES

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  1. IRS 1099 FORM REGULATIONS FOR SETTLEMENTS AND LEGAL FEES Do you know IRS 1099 match income and Social Security numbers? Most people pay attention to these forms at tax time. But lawyers and clients alike should pay attention to them the rest of the year as well. WHAT ARE THE 1099 RULES FOR SETTLEMENTS AND LEGAL FEES? Lawyers receive and send more Forms 1099 than most people. They make good audit subjects because they often handle client funds. Lawyers tend to have significant income. The IRS has the keen interest in the tax treatment of litigation settlements, judgements, and attorney fees. Lawyers are single out for extra Forms. The tax code requires the businesses making payments to attorneys and report the payments to the IRs on a 1099 Form. ISSUING FORM 1099 TO CLIENTS One of the confusing tax reporting issue for law firms is whether to issue Form 1099 to clients. Lawyers and law firms send as well as receive Form 1099. The basic reporting rule is that each person paying $600 or more in the course of business must report it on Form 1099. The reason is that lawyers receiving a joint settlement check to resolve a client lawsuit. FEDERAL 1099 FORM PAYMENTS FOR PHYSICAL INJURIES One of the important exceptions to the rules for Forms 1099 applies to payments for physical injuries. Legal settlements for auto accidents, slip-and-fall injuries are considered as compensatory damages. These payments are generally tax-free to the injured person. No Form 1099 is required to report the payments for physical injuries or physical sickness. FORM 1099 REQUIRES W-9 FORM Given that Forms 1099 require taxpayer identification numbers. Attorneys are commonly asked to supply payors with their own TIN’s and those of their clients. Usually, such information can be found on IRS Form W-9. The taxpayers can request the attorneys to fill out Form W-9. If the attorney is requested to provide a TIN and fails to provide it, he/she is subjected to a penalty. FOR REFERENCE: WWW.ENTREPRISESCANADA.CA LEARN MORE AT : WWW.FORM1099ONLINE.COM

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