united-states tax-law
Dealing with IRS Form 1099
<p>I'm running a small U.S. business. Some users make profit by referring customers to purchase services from me. I've been told that I have to send Form 1099 both to users who make such profits from me (Affiliate Users) and to the IRS. However, I have some questions regarding that form:</p>

<ol>
<li>Am I required to send Form 1099 to non-US citizens who are not even residing in the US? Since they're not required to file US taxes, do I still have to send the form to them?</li>
<li>Is it fine to expose my TIN (taxpayer identification number) to individuals or companies who I send the form to them. Since the form requires me to write my TIN/EIN, what would be the risks of this and what precautions should be taken to avoid inappropriate/illegal use?</li>
<li>I send payments via PayPal and wire transfer. Should I send form 1099-MISC or 1099-K?</li>
</ol>

<p><strong>tl;dr:</strong></p>

<ol>
<li>No.</li>
<li>You don't have a choice.</li>
<li>It depends, but the options are "no form" or 1099-MISC.  You'll never send a 1099-K.</li>
</ol>

<p>The only 1099 you would potentially be required to send for business payments is a 1099-MISC.  The <a href="https://www.irs.gov/instructions/i1099msc/ar02.html" rel="nofollow">IRS instructions on that</a> are pretty clear as to when and how you must use that.</p>

<p>Note that <em>you</em> don't send 1099-K's unless you are a payment settlement entity.  Furthermore, if you transmit the funds using a payment settlement entity who will report the transaction on a 1099-K, then you don't need to report it on a 1099-MISC.  (See "Form 1099-K" <a href="https://www.irs.gov/instructions/i1099msc/ar02.html" rel="nofollow">ibid</a>.)</p>

<p>Fortunately, PayPal is a payment settlement entity, so you don't need to worry about reporting payments you send through them ... with one big exception: PayPal does not report "payments to friends and family," and so if you're using that to avoid their fees then the IRS would consider you liable for reporting payments on a 1099-MISC.  To my knowledge banks do not report wire transfers, so you would have to file 1099-MISC when required for payments sent that way.</p>

<p>Regarding your TIN: Yes, these numbers get circulated in the course of business.  But this is actually one of the few <em>legal</em> uses of those numbers, and it's required, so if you're worried about identity theft or something then buy insurance against that.  And if you think <em>you've</em> got it bad, just think how your payment recipient must feel: Before you send funds that would need to be reported next year you are supposed to demand a signed <a href="https://www.irs.gov/uac/About-Form-W9" rel="nofollow">W-9</a> from them (so that you can make the report).  But hey, the IRS isn't oblivious to your concern: Check their "helpful" advice on <a href="https://www.irs.gov/pub/irs-pdf/fw9.pdf" rel="nofollow">the last page of W-9</a> to "Secure Your Tax Records from Identity Theft."</p>

<p>Regarding payments to entities not subject to U.S. taxation: You don't have to report those, and the fact that you reasonably believe the entity to be foreign is considered adequate to omit them from your 1099-MISC filings.</p>
