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1099 forms fall under the category of "information returns". Businesses must file information returns to report certain transactions. There are over 120 different transactions that require the filing of an information return and over 20 different information return forms. A common example includes filing a 1099-INT (the form) when interest income is paid to a third party (the transaction). The purpose of making companies go through the effort of filing information returns is to corroborate what the recipient of the money is telling the IRS. For example, if your company paid an independent contractor $50,000 during 2010 for consulting fees, you would need to file a 1099 form and submit it to the IRS and send a copy to the independent contractor.
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