Has anyone answered yes to, was taxpayer required to file 1099 forms and no to, did taxpayer file 1099 forms? If so was any repsponse received from IRS? I have never done this and am just curious if anyone has had the nerve to do this.
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Proliferation of Questions
WOW! I knew there are a buncha questions on Schedule C but didn't realize there were 1099 of them... -
I have....haven't heard anything yet.Believe nothing you have not personally researched and verified.Comment
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Taxea, Which year?
Was this for 2012 or 2013?Comment
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I did the first year the questions existed, 2011? Client flatly refused to issue for janitorial work. Never heard a peep.Comment
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So did I an 2011, at least for 2 clients, so far so good.Comment
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Ever since the questions appeared, I've often wondered what their true purpose might be. It's more likely that they are simply "Gotcha" questions rather than something which red flags the return itself for an instant audit. More than likely, they are there for the same reason as the auto questions - to box in the client in the event of an audit.
On the other hand, it seems that it might be possible for IRS to program their computers so that the wrong combination of answers to the questions might add some points to the DIF score. So maybe indirectly the wrong answers might help move the return up on the list.
Now if IRS ever adds a line on the Schedule C requiring that the total paid to I/C's be specifically disclosed, that would add an entirely new element to the discussion.Last edited by JohnH; 05-23-2014, 04:56 PM."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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Line 11 on Schedule C is for total contract labor (independent contractor) payments. If this exceeds $600, then the IRS could certainly do letter audits especially if that question is answered No. Even if it is answered Yes, they could use an arbitrary number to randomly check 1099's by EIN or SSN, or ask for verification from the TP. As far as I know, they never have. I have one client whose biggest expense is Line 11, maybe 60-75% of his gross income, but they have never questioned it. The first year he told me No to the 1099 question, and I advised him of the requirements. Now he says only has 1 or 2 which require them and he does issue the 1099's. So I answer it YES, but I have never seen them. Am considering asking for the copies, since the amount is so large. Not that I don't trust him.Comment
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I agree with you concerning Line 11. However, there are many providers of other types of services who should be issued 1099 forms but the expense is properly reported in a different line. Payments for Advertising/Promotion or Repairs, for example - if the provider is not incorporated.
If I were working for IRS and trying to glean info from the tax return to determine potential additional tax liabilities, I'd require that all payments which require the issuance of a 1099 be listed on line 11, regardless of the expense category. That would put pressure on both the taxpayer and the preparer to fully disclose the extent of the amount for which the Yes/No answer has been provided."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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Looking at it from the IRS standpoint, that is a good idea.Comment
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Yes, just to be clear, I'm not advocating for IRS doing that
"The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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