Trade or business reporting only. Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements. Other organizations subject to these reporting requirements include trusts of qualified pension or profit-sharing plans of employers, certain organizations exempt from tax under section 501(c) or (d), farmers' cooperatives that are exempt from tax under section 521, and widely held fixed investment trusts. Payments by federal, state, or local government agencies are also reportable.

Persons receiving rental income from real estate generally are considered to be in the trade or business of renting property. See page 3.

Exceptions. Some payments are not required to be reported on Form 1099-MISC, although they may be taxable to the recipient. Payments for which a Form 1099-MISC is not required include:

**Generally, payments to a corporation; but see Reportable payments to corporations on page 2;**

Payments for merchandise, telegrams, telephone, freight, storage, and similar items;

Payments of rent to real estate agents, but see Regulations section 1.6041-1(e)(5), Example 5;

Wages paid to employees (report on Form W-2, Wage and Tax Statement);

Military differential wage payments made to employees while they are on active duty in the Armed Forces or other uniformed services (report on Form W-2);

Business travel allowances paid to employees (may be reportable on Form W-2);

Cost of current life insurance protection (report on Form W-2 or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.);

Payments to a tax-exempt organization including tax-exempt trusts (IRAs, HSAs, Archer MSAs, and Coverdell ESAs), the United States, a state, the District of Columbia, a U.S. possession, or a foreign government; and

Certain payment card transactions if a payment card organization has assigned a merchant/payee a Merchant Category Code (MCC) indicating that reporting is not required. A cardholder/payor may rely on the MCC assigned to a merchant/payee to determine if a payment card transaction with that merchant/payee is subject to reporting under section 6041 or section 6041A. For more information and a list of merchant types with corresponding MCCs, see Revenue Procedure 2004-43 available at www.irs.gov/irb/2004-31_IRB/ar17.html.

http://www.irs.gov/instructions/i1099msc/ar02.html#d0e89

Must you? Not under the current rules. Should you? That depends. If any of my clients need to issue even ONE 1099, I generally recommend they issue them to everyone even if they aren't required by law to do so.

The current law says you have to issue 1099-MISC whenever you pay an UNINCORPORATED entity $600 or more during the course of your regular trade or business. Unincorporated means individuals, partnerships & LLCs and could include unincorporated associations who may have elected to be taxed as a corporation. In my opinion it also includes LLCs who've elected to be taxed as corporations since there is no way for the issuer to tell how an LLC has elected to be taxed.

In the course of your regular trade or business means just that. IF you are running a business and you pay a noncorporate entity $600 or more you must issue a 1099. If you, as a homeowner, bring in someone to replace your roof and you pay them $1,K then issuing a 1099 is not only unnecessary but inappropriate. On the other hand, if the work was done on a rental property then a 1099 is required.

EAgent, there is a way to know whether an LLC has elected to be taxed as a corporation. This was the purpose of the recent change to Form W-9 to include a checkbox to indicate how the company is taxed. Presumably the converse would also apply -- if a Corporation has elected to be taxed as an LLC, then a Form 1099-MISC would need to be issued, I assume. So businesses should not assume that just because an organization is a Corporation that information returns can be ignored. It is best to determine the tax classification for all vendors.

Now whether one must anticipate whether a company has changed its classification to be taxed in a certain way is another potential irritant.