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Grab your wallet, the IRS wants more money!!!
IRS to business owners: Did you file your 1099s? Posted: Friday, February 10, 2012 7:21 am By Joyce M. Rosenberg, AP Business Writer Business owners will find two new questions on their income tax forms this year: "Did you make any payments in 2011 that would require you to file Form(s) 1099?" and, "If ‘Yes,' did you or will you file all required Forms 1099?" This is a rather pointed reminder to businesses that they're required to send 1099s to people or companies they've paid money to - particularly independent contractors who were paid more than $600. And to file copies with the IRS. The questions are hard to miss on the tax forms. On Schedule C, the form filed by sole proprietors, they're in the top section, right before you start reporting your income. Here are some things you need to know about 1099s: The rules It's mandatory to send 1099s to people who you've made payments to. The forms are specific for the kinds of payments. Form 1099-DIV, for example, must be used if you have a corporation and you've paid dividends to shareholders. The most familiar one for small business owners is 1099-MISC, the form used to pay independent contractors. Neil Becourtney, a certified public accountant with J.H. Cohn LLP in Roseland, N.J., believes the government has included the new questions on tax forms because it wants to get more companies to comply with the tax law. "They want taxpayers to announce that I as a corporation or partnership or sole proprietor filing a schedule C had reason to issue 1099 forms," he says. The penalties can be steep if you don't send the forms, they're late or the information on the forms is incorrect. The penalties start at $30 per 1099. The IRS can waive them if you can show "reasonable cause" for not filing the forms. But, Becourtney says, businesses that say they will file 1099s and then don't may find it harder to avoid penalties. Becourtney says many businesses wrongly believe that 1099s are intended only for individual recipients. If you hired a law or accounting firm and paid more than $600 in fees, you need to send a 1099. And if you receive a 1099 from someone you've done work for, you have to report the amount you were paid. Don't shrug it off. The IRS will be looking for that income on your return. About the independent contractors The government has been paying more attention in recent years to the issue of independent contractors, and whether some businesses are trying to avoid Social Security and Medicare taxes by classifying employees as contractors. A business that does that is violating the law. Becourtney says many employers call part-time workers independent contractors. But the definition of an independent contractor doesn't have to do with hours worked; it's all about how much control a business has over the worker. The IRS puts it this way: "The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done." The IRS website - www.irs.gov - has more information about independent contractors. Some nuts and bolts Be aware that you can't download and use the 1099 forms that are on the IRS website. You'll have to order forms from the IRS. The individuals or companies who you've paid must get a copy, and the government gets one too. You can mail paper forms to the IRS or file them electronically. For information about the mechanics of filing 1099s, download "General Instructions for Certain Information Returns." There are also instructions for specific 1099s including 1099-MISC. The deadline for sending paper 1099s to the IRS is Feb. 28. If you're sending them electronically, the deadline is April 2. |