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TOPIC: 1099 Forms

1099 Forms 10 Feb 2012 17:05 #37832

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NEW YORK—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.
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