Newsletter Explains Use of IRS Form 1099 for Freight Services

The December 9 issue of the State Laws Newsletter offered an explanation concerning the issuance of Internal Revenue Service (IRS) Form 1099 for freight services: IRS regulation, 26 CFR 1.6041-3(c), exempts payment for “freight services” from the general requirement for payors to issue independent contractors and others with which they do business the information reports known as 1099s. “That is, according to IRS, a trucking company does not have to issue a 1099 to another trucking company to which it has brokered a load,” noted the newsletter.

In fact, according to IRS (see the IRS’s Trucking Industry Overview) under Significant Law and Important Issues, a trucking company does not need to issue 1099s to owner-operators under lease to the company.“We suggest, however, that it might be wise for trucking companies to continue to issue 1099s to their owner-operators,” noted Robert Pitcher, the newsletter’s editor. “IRS has been highly concerned about misclassification of employees as contractors, and a trucking company that has consistently issued 1099s to its owner-operators may be in a stronger position to defend itself should the need arise.Moreover, some states rely on the issuance of 1099s by payors as an indication that the payees were not employees for purposes of worker’s compensation.”

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