Estate payments for services requires 1099??

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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Topic Author
Seasonal
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Joined: Sun May 21, 2017 1:49 pm

Estate payments for services requires 1099??

Post by Seasonal »

An executor's lawyer says that payments made by the executor to a professional (e.g., attorney or accountant) must be reported on a 1099 to the payee.

My understanding is that any person engaged in business and making a payment of $600 or more for services must report it on a Form 1099. However, a normal estate or executor (at least one who is not regularly engaged in the executor line of work) is not engaged in business and therefore would not have to report fees paid on a 1099.

Am I correct in this?
Topic Author
Seasonal
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Joined: Sun May 21, 2017 1:49 pm

Re: Estate payments for services requires 1099??

Post by Seasonal »

The IRS appears to support my interpretation:
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.
https://www.irs.gov/pub/irs-pdf/i1099msc.pdf
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Eagle33
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Re: Estate payments for services requires 1099??

Post by Eagle33 »

Good job in finding the answer yourself. An example of learning how to fish.
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.
Topic Author
Seasonal
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Joined: Sun May 21, 2017 1:49 pm

Re: Estate payments for services requires 1099??

Post by Seasonal »

Eagle33 wrote: Fri Jul 17, 2020 6:52 pm Good job in finding the answer yourself. An example of learning how to fish.
The tax code is seldom as simple as it appears. It would be good to know that there's not other learning that contradicts the IRS publication. For example, in other threads a number of people have written against the language in the IRS publication on wash sales.
johnnyc321
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Re: Estate payments for services requires 1099??

Post by johnnyc321 »

The lawyer is wrong. The executor should hire an accountant. Few lawyers can file income tax returns and those who do charge way more than competent CPAs.
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