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The Farm CPA

RSS By: Paul Neiffer, Top Producer

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

Do We Have to Issue a 1099 for the Purchase of Feed?

Dec 21, 2010

One of our readers asked the following question:

"I bought some high moisture corn from another farmer for feed in my feedlot. Do I have to send a 1099 to the farmer from which I purchased the corn? "

When a farmer purchases services from a non-incorporated taxpayer and those purchases total more than $600 for the year, the farmer is required to issue a form 1099 to the recipient.  Services are generally for items such as legal and accounting services, custom hire, etc.  The purchases of goods does not require a form 1099.  If you think a form 1099 might be required, then you should obtain from the vendor a form W-9 and retain that for your files.  Also, you should issue a form 1099 for cash rent paid to your landlords.

In this case, since the farmer is purchasing feed, which is not a service, then a form 1099 is not required.

However, this is all scheduled to change beginning in 2012.  Under the Health Care Act passed earlier this year, the law requires businesses beginning in 2012 to issue form 1099 on ALL purchases that exceed $600 for the year to any vendor.  This law may get repealed in 2011, but it is the law on the books right now.

Remember that there is no penalty for issuing a form 1099 in error.  The only time there is a penalty (which can be about $100 per 1099) is if you do not issue a form 1099 when one was required.  Therefore, when in doubt, get a form W-9 from the vendor and issue a form 1099 at the end of the year.  For 2012, unless the law changes, make sure to get W-9 from all of your vendors before year-end.

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