Can I file old 1099's

[rkamp]

I have a client who did not report $100,000 (on a 1099) in income in 2009 and is being audited by the IRS. My client had several workers on contract during this time that are willing to pay taxes on their share of the income in 2009.

Can I submit 2009 1099/1096's and will they still be accepted and processed?
(Hopefully I can find them!)

Thanks,

Rick

[S T]

Audit

First NO-NO is that the Client should have reported the income on the whatever line (form in question) and then subsequently deduct the "outside services" (under expenses)

I have had this happen
During audit, just address the situation - client "did not know to report on 1099 form" "plead ignorance" whatever

however, you had better have the substantiatin to claim it

Offer the auditor to file the 1099 misc forms late - they might or might not accept your offer of forms produced (after the fact) and then they might, assess the late file penalties on the late filing of the forms - but it seems you have a lot of "sub-contractor" payments to deduct - so penalties for late file of 1099 forms could be worth the effort.

Depending in the year in question - I believe you said 2009 - if that is the year - I can go search my bookcase and can probably find some that I can mail to you

Keep us posted

Sandy

As a footnote - A year or so ago, I needed some older 1099 forms, and there were a couple of offers from some of our "Regular Posters" that just happened to have some "stock" and immediately sent them to me. It was a "Godsend" - I do believe I sent them individual thank yous - not posted on the Board of course - but if I neglected to send a thank you, I need to make up for it now

This Board is Great - as we all seem to rally around each other and help where we can.

[JohnH]

Does he need the auditor's permission to file the 1099's? I'd be inclined to just go ahead and file them without comment or question. The copIes of the properly filed 1099's would then be a part of the supporting data provided to the auditor. There may not even be any question raised about when they were filed, but if the question arises you can then explain the timing and circumstances. Also, is this a face to face audit or is it a CP2000 that needs a reply?

Post how many 1099's you need - as Sandy said this forum is often a great place to get old paper forms.

[BOB W]

My auditor is saying, "No 1099= no deduction". Auditor wants all missed 1099s issued regardless of how old.

[Edsel]

Govt will encourage 1099s

Yes, they will insist on this being done before they will allow your client the deduction for same.

Govt will be interested (or at least they SHOULD be) in penetrating the underground economy and people who get paid under the table. So filing the 1099s will give them the chance to catch pay recipients for not filing. If there are several 1099s, I'd be willing to wager that half of them did not report the income.

Also if they want to really throw the book at the situation, they can try to recharacterize the 1099s into W-2s. Then your client really has a nightmare.

[JohnH]

If Rick has software to generate form 1099 for the 2009 year, it's easy enough to produce the 1099's in black and white for sending to the employees. They can even be hand typed on a black black & white form if software isn't available. (Or using trial and error to set up an excel spreadsheet to drop the info onto a preprinted blank form) That takes care of the employee copies. Unless there are a huge number to be produced, that's a fairly easy task.

The Copy A which goes to IRS, and the 1096, must be the Red drop-out ink. I have some of those for the 2009 year on hand and could send them to you if you wish. Rick, send me an email or a PM letting me know your address & how many you need and I can get them out to you today or Monday.

[Jiggers]

"I have a client who did not report $100,000 (on a 1099) in income in 2009 and is being audited by the IRS. My client had several workers on contract during this time that are willing to pay taxes on their share of the income in 2009."

I have a problem with this. I read it as the taxpayer just didn't report the income and was caught when a 1099 was received by the IRS.

I also read it that his contract workers didn't report the income because the taxpayer wasn't going to issue 1099's.

Now the taxpayer wants to come clean and those contract workers are going to go back and report the income.

Yes, issue the 1099's even though they are late. Otherwise the taxpayer may get stuck with the IRS calling them employees and then the taxes and penalties will really get big.

I have no sympathy with taxpayers that do this to avoid paying taxes.

[Jiggers]

Now for those that haven't seen the new 2011 Schedule C's, E's, and F's, there are questions regarding the taxpayer issuing 1099's.

to paraphrase:
1. Were payments made that required 1099's to be issued.
2. Did you issue the 1099's.

I have started warning my clients and will follow up with a letter after 10/15 when I am finished with extension.

[Gary2]

Now for those that haven't seen the new 2011 Schedule C's, E's, and F's, there are questions regarding the taxpayer issuing 1099's.

to paraphrase:
1. Were payments made that required 1099's to be issued.
2. Did you issue the 1099's.

I have started warning my clients and will follow up with a letter after 10/15 when I am finished with extension.

Curious that this question is on Sch. E. I thought they removed that requirement for rentals on Sch. E, and for partnerships or S-corps, it would normally be the entity issuing the K-1 that would be responsible for the 1099s.

[rkamp]

Thanks for the help!

Actually the State of California found the income, not the IRS. The client had his taxes done at another firm and I'm having the pleasure of cleaning everything up.
I'm going to file the 1099's and amend the return to include the income and any substantiated expenses before the IRS audits the return. The reason that the IRS didn't "catch" the problem was that the 1099 for the $100,000 was issued with an invalid EIN number. The smart programmers from CA matched up the name and address on the 1099 and sent the taxpayer a bill. I called the state of California up and they were more than happy to correct the EIN on the original 1099 to match the taxpayer's SSN.

Thanks so much for all your help and if I need the red copies of the forms 1099/96's, I may take one of you up on this offer.

Best regards,

Rick Kamp, EA

[DaveinTexas]

In one of my audits

My auditor is saying, "No 1099= no deduction". Auditor wants all missed 1099s issued regardless of how old.

my client prepared the 1099s but never mailed them to IRS or the recipients!

The auditor said the mere filing of the 1099s didn't hold much weight; meaning she wouldn't have taken the 1099s at face value anyway. Sure they are important to file to be compliant and to avoid penalties but the auditor in my case wanted to see the canceled checks to prove the contract labor.

In the absence of the 1099s, the auditor also took the extra step to check if the persons my client paid as ICs actually filed a return at all. Most of them had not. This did not eliminate the deduction for my client but it might have helped their case if they had not kept the canceled checks as proof of the deduction.

[JohnH]

Yes, you're absolutely right about the checks. I had just assumed that the I/C's were paid by check. Looks like your client dodged a huge bullet thanks to how you handled the audit. If I ever get audited I'm calling you...

If the client could not produce canceled checks, I think I would refuse to prepare 1099's under almost any scenario - current or late.

[DaveinTexas]

You bring up a good point

Yes, you're absolutely right about the checks. I had just assumed that the I/C's were paid by check. Looks like your client dodged a huge bullet thanks to how you handled the audit. If I ever get audited I'm calling you...

If the client could not produce canceled checks, I think I would refuse to prepare 1099's under almost any scenario - current or late.

Many times, we receive a list of 1099s to prepare/file on behalf of our clients without asking for any additional proof (partly because January is crunch time for mailing out the 1099s to recipients). The IRS could penalize us for filing (what may turn out to be) a false 1099.

Ex: Bill says he paid Suzie $50,000 but he really only paid her $10,000. Bill is your client and tells you he needs to send Suzie a $50,000 1099.

I wonder if "relying on client's records" would hold water in a situation like that. Or maybe I just found a way to not ever have to prepare another 1099 again!!! Not worth the hassle!

[JohnH]

Just in the interest of full disclosure, I'll prepare a few 1099's for nominal amounts for a regular client whom I trust. Usually this is just amounts written on a summary sheet. But I ask to see some sort of documentation if the amounts are large - prefereably canceld checks, but it is all situational.

I always suggest that they provide a list of checks, dates, and amounts whenever possible. I then include the list with the 1099. Saves a lot of those " I didn't get paid this much! " calls to the client or to our office after the 1099's go out. (I don't think the list runs afoul of any discolsure rules. Does it?)

[DaveinTexas]

All good ideas

I like your approach with the list of check numbers along with the summary list.

I have to assume the IRS would give us some leeway on the filing of 1099s, but you know what happens when we "assume the IRS....."