IRS Enforcing 1099 Reporting Compliance
The IRS is attempting to increase 1099 reporting compliance by businesses by asking the following questions on tax returns this year:
1. Did you make any payments in 2011 that would require you to file Form(s) 1099?
2. If “Yes,” did you or will you file all required Forms 1099?
These questions will be on all business returns regardless of entity type (corporation, partnership, LLC, or sole-proprietor). Those businesses who do not issue all required 1099’s will more likely be audited. In addition, the IRS can disallow expenses to vendors that should have been issued a 1099 form and were not.
A 1099 should be issued to a vendor or subcontractor if they are paid $600 or more for services in a calendar year. A 1099 does not need to be issued to corporations that are paid $600 or more during the year; they should only be issued to partnerships, LLC’s, and sole-proprietors. The only exception to the corporate exclusion rule is law firms that are incorporated. Any law firm, regardless of entity type, should be issued a 1099 if they are paid $600 or more in services during the calendar year.
In order to obtain the proper information from a vendor to issue a 1099, the vendors should complete a W-9 form. We have a link to the W-9 form under ‘Resources – Forms’. The best practice for assuring that your business receives the proper information from vendors is to ask them to complete the W-9 form before you pay them.
If you have any questions about who should be issued a 1099 or if you would like us to prepare the 1099 forms for your business, please call us at (262) 798-8160.
1099 Forms for 2011 must be mailed to recipients by January 31, 2012 so please contact us soon!