Filing 1099 Forms – Serious Business!

Taxpayers may not like receiving 1099s. Businesses may not like sending them out. Perhaps no one likes 1099s except the IRS!  The agency loves them because they easily allow the matching of data against tax returns.   Forms 1099 are a vital part of IRS matching. Take these forms seriously. The IRS sure does!

Form 1099-MISC is the form you MUST complete when you pay for certain business expenses such as rent or services performed by an independent contractor.  Information reporting has become the centerpiece of IRS enforcement efforts.

Who gets a 1099-MISC?

Indpendent contractors paid over $600 in one year

Landlords who receive Rent

Any amount paid to an attorney

When are they due?

On or before January 31st you must furnish a copy of the 1099-MISC to the recipient and you must also submit the 1099-MISC information to the Internal Revenue Service by the same deadline.

August is a good time to review your filing compliance because this is the time of year the IRS typically begins sending notices for prior year information such as returns with missing and incorrect taxpayer identification numbers

How do I get the info I need?

BEFORE you pay an Independent Contractor have them complete an IRS Form W-9. This will give you all the information you need to file AND will protect you from penalties if any of that information is incorrect.  The form is available on our website.  Or click here: Form W-9

What are the penalties if I don’t?

The IRS is serious about your complying with the 1099 reporting requirements.  Take a look at the penalties:

Failure to Furnish a 1099 to the payee – $530;

Failure to File the 1099 with the IRS – $530;

Filing with the IRS up to 30 days late – $50;

Filing with the IRS late but by August 1st – $100;

Filing after August 1st – $260.

This is PER 1099 and the Failure to Furnish is in addition to the Failure to File so if you do not issue 1099’s when required it could cost you $1,060 PER Form 1099.

I received an IRS notice, now what?

If you get a notice, you may be able to get penalties waived by proving you acted in a responsible manner before and after the error.

The notice has to be answered within 45 calendar days (60 days for foreign payers) from the notice date.

If more time is needed, submit a written request to the address listed on the notice before the end of the 45 day (60 days for foreign payers) period.

Explanations should be as detailed as possible to limit the number of contacts required to establish reasonable cause, and should provide an explanation of the steps taken to comply with the Internal Revenue Code and regulatory provisions.

Do not submit copies of the solicitations unless requested by an IRS employee.

If reasonable cause is established, IRS Letter 1948C will be issued stating that the explanation given was accepted.

If the reply does not establish reasonable cause, or only partially establishes reasonable cause, a penalty will be assessed. A balance due notice will be sent (CP15/215) with a separate letter explaining any appeal rights.

Agreement to the proposed penalty should be submitted with a payment and the response page (or signed consent statement on the response page) and the payment slip to show agreement. A balance due notice (CP15/215) will be sent after receipt of the consent statement.

No response to the Notice 972CG within 45 days (60 days for foreign payers) will result in assessment of the full amount of the proposed penalty and a balance due notice (CP15/215) being issued

Please contact us for more information.

 

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