As most of us know, Congress has been trying to close the so-called “tax gap”, the difference between what the IRS estimates taxpayers owe for a year and the amount the IRS actually collects, for years.
In 2010, it passed new 1099 filing requirements, which were later repealed, due to complaints that the rules were too burdensome on businesses. These included filing 1099’s for all payments made by businesses, including those made to corporations and not just for services (for instance to Office Depot for office supplies), as well as requiring Landlords to issue 1099’s to service providers.
So we are back to the previous 1099 filing requirements.
But there are two significant developments that we need to bring to your attention:
The penalties for failing to file 1099’s with IRS by 2/28 have been increased to $100 per 1099 (up from $50), with a maximum of $1,500,000 (up from $250,000). Businesses can be assessed another penalty for failing to supply the 1099 to the service provider of $100, with overall limit between the two penalties of $3,000,000. And the penalties will be strictly enforced.
Two questions have been added to all business returns.
These include: Schedule C, Schedule E (see note 6. below), Schedule F, Forms 1120 & 1120-S for corporations, and Form 1065 for Partnerships.
Did you make any payments in 2011 that would require you to file Form(s) 1099?
Yes or No
If Yes, did you or will you file all required Forms 1099?
Yes or No
You can see that Congress is getting serious about this issue. As an owner or officer of the business, you are signing the return under penalties of perjury that the answers to these questions are true. And as your CPA’s & tax preparers’ we can’t ignore the questions either
We have staff available to assist you in preparing 1099’s before the February 28th deadline.
Quick summary of current 1099 filing requirements (not meant to be all-inclusive):
Businesses that paid $600 or more during 2011 for services to a person or entity (that is not a Corporation) are required to prepare Form 1099-MISC. File with the service provider or landlord by 1/31/12 and with IRS by 2/28/12.
Other general notes:
1. If paid to a Corporation for services, no 1099 is required
2. Payments for services to individuals, sole proprietorships, partnerships, LLC’s, LLP’s are required
3. Payments to all Attorneys are required (whether the attorney is incorporated or not)
4. Payments for Rents are included (and considering most real estate is owned by non-corporations, rents paid by most businesses will have to be reported)
5. Delucchi, Hawn & Co is an LLP, so a 1099 should be filed for us
6. Landlords that report their rental property on Schedule E of their Form 1040s, are not required to file 1099’s to service providers. However, if Form 1065 is filed for a partnership or LLC for rental properties, 1099’s are required.
If you have any questions, please contact our office as soon as possible.