Eliminating Headaches and Penalties for IRS 1099 Forms

 In Blog, Business Tax Tips, Educational Issues, Featured

As your business advisors, we’d like to remind you of the IRS’s requirements for W-9 and 1099 Forms and filings. Additionally, we would like to point out a few steps that you need to be taking NOW to avoid big headaches in the future!

What are the Rules?

 The IRS requires that you file 1099’s for individuals (who are not your employees) and all non-incorporated entities to whom you have paid at least $600 in rents, services, and prizes/awards in the course of your trade or business during the calendar year. You must also file 1099’s for payments made in the course of your trade or business to attorneys even if they are corporations.

What to Do

 Obtain a completed and signed W-9 BEFORE paying any vendor. Vendor information from the W-9 must be input into QuickBooks or provided to us. We have enclosed a copy of the W-9 Form with this letter as well as made it available on our website (www.bresslercompany.com). Hover your mouse over the “Resources Tab” and select “IRS W-9 Form”. If any vendor refuses to provide you with a signed W-9, the IRS requires that you withhold 28% as backup withholding, then report it on Form 945. If you fail to withhold this, YOU may become liable for any uncollected amounts. The best way to avoid being denied the signed W-9 is to withhold payment to any vendor until it is received.

Why Comply?

 There are penalties for failing to timely file, failing to include all information required, failing to include correct information, and paper filing when you are required to file electronically. Penalties range from $30 to $100 per form, with a maximum penalty of $1.5 million. However, if the rules are intentionally disregarded, penalties increase to $250 per 1099 with NO MAXIMUM PENALTY. Along with the penalties, your business expense deduction for the payment will be disallowed on your tax return, increasing your tax liability.

Saving you money is our biggest priority. If you have any questions about this information, just give us a call. We love to chat with you. After all, we believe that we’re truly in the “people business.” We just happen to be very, very good at numbers!

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