New in 2011 to all federal business tax returns (i.e. Schedules C, E, F and Forms 1065, 1120, 1120S, etc.) was a box asking whether any payments were made during the year that would require Form 1099 to be filed and a box asking whether or not you filed all required Forms 1099. It is becoming more and more important that you comply with all l099 reporting requirements. 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 Forms 1099 are not filed, you could be held liable in the event of an IRS audit.
This letter is geared towards Form 1099-MISC, the most common Form 1099. Forms 1099-INT and 1099-DIV meet the many of the same requirements, but must be sent to everyone you paid $10 or more.
As a reminder, you need to send a Form 1099 to all sole proprietors, partnerships, and LLCs that you paid rent or royalties, as well as any independent contractors and attorneys that you paid for services in 2012. Incorporated vendors, except for attorneys, are exempt from this requirement.
You are only required to send a Form 1099 to anyone meeting the above requirements if you paid them $600 ($10 for royalties) or more in 2012. Please review your records to see if you have any vendors who qualify.
The main information needed to complete a Form 1099 is the vendor’s name, address, and social security number or federal identification number. The IRS provides a form, a W-9 Request for Employer Identification Number and Certification, for you to mail to a vendor as a request for this information.
All 1099s are to be distributed to the recipients no later than January 31, 2013, in order to avoid penalties (discussed below). In order to prepare the necessary forms, you have several options available to you:
You may prepare all Forms 1099 for any person or business to whom you paid more than $600 in 2012 using forms from an office supply store. Software and online services are available to quickly and easily file your information returns electronically.
- Potts & Company, Inc. will prepare Forms 1099 for you. We will need copies of all completed W-9s and the total paid to each person or business paid $600 or more in 2012 no later than January 15, 2013, in order to guarantee completion before January 31, 2013.
- If you are a bookkeeping client of Potts & Company, Inc., we will let you know who to request Form W-9 from and prepare all necessary Forms 1099 at year end.
For 1099s required to be filed by January 31, 2013, the penalties in the tax code for failure to timely file have increased.
- Filed less than 30 days late: $30 per 1099
- Filed more than 30 days late: $60 per 1099
- Filed after August 1, 2013: $100 per 1099
- Not file at all: $250 per 1099
If any service provider refuses to complete Form W-9 with their taxpayer identification number (either their Social Security number or the federal identification number), 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.
If you would like Potts & Company to prepare your 1099s for 2012, we would like this information no later than January 15th to ensure that your 1099s are processed in a timely manner. Keep in mind that 1099s must be mailed by January 31, 2013. If you have any questions, ask for Cliff.