The IRS has added a number of questions to the 2011 business tax returns (Form 1040 Schedule C, Form 1065 and Forms 1120 and 1120S) regarding 1099 filing. The IRS wants to know if the taxpayer has made any payments in 2011 that would require the filing of Form(s) 1099 and, if the answer is "yes," they want to know if you have filed all required 1099s. Keep in mind the partner or officer who signs the return takes responsibility for answering these questions and tax returns are signed under penalties of perjury.
We do not yet know the consequences for answering that you made payments that required a 1099 and then subsequently answering that you did not file the required 1099s. Although the IRS will not be able to audit every return, they may send correspondence pulled automatically from this response.
As a HORNE client, you receive guidance regarding the need to file 1099s. If you choose to forego 1099 filing, please recognize that this is an area in which the IRS will continue to increase scrutiny as they attempt to locate either non-filers or those who are not reporting all of their income.
Form 1099 is required when a taxpayer pays $600 or more during the calendar year to a third party for services rendered. Taxpayers will not need to issue 1099s to corporations, but should issue them to individuals or other non-corporate businesses (i.e. landlords, lawyers, accountants, contractors, builders, repair and maintenance service providers et cetera). The business is responsible for filing 1099 forms by February 28, 2012, for 2011 taxpayers. Penalties range from $30 per 1099 to $100 per 1099 if filed after August 1.
For more information about tax filing requirements, please contact your HORNE Tax Advisor.