Do we report payments made to our investors on a 1099, or are they exempt?


Q. (cont.) We are making quarterly payments to our capital investment firm, and I want to make sure that I report the payments on the 1099 if necessary.

Our company was purchased by an investment firm and we are making quarterly payments to our investors. It was a set amount negotiated on the contract to be paid quarterly. Would that be reported on a 1099-MISC, box 7, for non-employee compensation?

A. It sounds as though the investment firm is now a partner in your company. Reporting of income, losses and dividends to individual partners is made on Schedule K-1, not a 1099-MISC (see IRS Instructions for Schedule K-1 (form 1041) for a Beneficiary Filing Form 1040, “Purpose of Form”). We see nothing in the IRS Instructions for Form 1099-MISC to indicate that you would report the payments via that form.

 However, this is beyond our expertise, and we recommend that you consult a tax accountant.

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