The Internal Revenue Service’s Office of Chief Counsel has issued a memorandum confirming that a motor carrier need not issue a form 1099 to report payments to an owner-operator under lease to the carrier, provided that the payments represent amounts earned for hauling freight.
This ruling is nothing new, since the exemption has been in place since 1918, and currently appears in IRS regulation section 1.6041-3(c). Although the term “freight” is to be interpreted broadly, the IRS advises that whether a specific charge is actually for the hauling of freight may depend on the particular facts of a given transaction.
Even though the issuance of a 1099 is not legally required, we caution carriers using owner-operators that it is still advisable to do so, in order to protect and reinforce the owner-operators’ status as independent contractors. The IRS’ memo is Chief Counsel Memo No. 20151002F, dated June 6, 2014, and released March 6, 2015.
For further information, contact Bob Rothstein.