January Tax Compliance – 1099 Issuance
1099s are to be issued under the form 1099NEC.
We would like to take this opportunity early to remind you of the disclosure requirements implemented by the IRS regarding the filing of Form(s) 1099.
It is important that your 1099s and accompanying 1096 are timely filed by January 1st, 2024
If you recall, on the 2022 income tax return there was a box asking “did you make any payments that would require you to issue a 1099” and “if yes, did you or will you file all required forms 1099?”
A penalty for failure to file a 1099 can be assessed up to $520 per recipient. A $1,060 penalty per recipient can be assessed for intentional disregard of payee statement requirements.
Additionally, when you sign your tax return, you are stating that, “under penalties of perjury, to the best of your knowledge and belief your tax return is accurate and complete.”
If all required 1099s are not filed, and the return states otherwise, it seems additional taxpayer and tax preparer penalties could apply.
This is obviously an area that the IRS is heavily scrutinizing in an effort to increase compliance.
Compliance with the 1099 requirements is essential.
Basic 1099 Requirements:
- When payments are made in the course of your trade or business, you are required to issue a 1099 to all sole proprietors, partnerships, and LLCs that you paid for services (including parts and materials) or rent equal to $600 or more in 2020.
- 1099s are also required if you made gross payments to an attorney of $600 or more, or if you paid interest, dividends or royalties of at least $10.
- There is an exemption for payments made to corporations, but it does not apply for legal services.
Since Buck Stops Here Accounting, Inc. is a corporation, you do not need to send us a 1099.
In order to have the information necessary to provide recipients with
1099s, you must have their correct taxpayer identification number.
The IRS provides form W-9 for this purpose. It is your responsibility to make sure you have this information before any payments are made to a vendor that would require a 1099. If any service provider refuses to complete Form W-9 you are required to withhold 28% of all payments to them and remit the money to the IRS.
If this situation applies to you, please contact our office for further assistance and additional information. A copy of the W-9 can be obtained at the following website: IRS FORM W9
We recommend going forward, that before your first payment is made to an Independent Contractor, you obtain a this form W9 along with an Independent Contractor Agreement.
**Efficiency is a big part of our culture and that includes a continuing effort to be paperless. We will be E-Filing all the clients 1099s.
If you are interested in becoming a client of ours, you may fill out the following Client Application Form.