1099 Penalties Assessed

[equinecpa]

Had a client receive a penalty notice for filing 1099's late. Has anyone ever received one of these? The worse thing is I believe the 1099's went out on time to the individuals but I was waiting on her to get info for someone who she wasn't able to and then transmitted them late to the IRS. Any chance of a waiver here?

CArolyn

[taxea]

Why hold up the IRS copy if you were only waiting for info on one person? I would have filed them on time with an explanation for the one that was lacking info. Better they get to the IRS on time.....the other copies don't cause a penalty if mailed late.

If I were to put on an IRS hat I would say no waiver because the delay was unnecessary.

[ATSMAN]

Strangely enough I have heard of situations where a 1099-Misc was issued to the taxpayer on time but the IRS copy was never filed and there was no followup!

[Black Bart]

Had a client receive a penalty notice for filing 1099's late. Has anyone ever received one of these?

Yes.

The worse thing is I believe the 1099's went out on time to the individuals but I was waiting on her to get info for someone who she wasn't able to and then transmitted them late to the IRS. Any chance of a waiver here?

Yes. I've gotten two waivers over the years (and maybe one more that I never heard anything back from the client). The first two clients had about 30-40 1099s each. I had given them the forms, told them to hold and mail around Feb. 20 (so I could fix any mistakes without doing corrected 1099s). They (of course) forgot about it (last time I did that) and got notices.

An IRS Taxpayer Advocate rep once told me the two most important things to address were "why it happened" and "why it would not happen again". You know (I assume) that 1099s can be sent in different batches as long as accompanied by a 1096, so you don't have a good excuse (other than "My bad!"). Get together with the taxpayer and have him/her handwrite a personal letter (or, you can type it and have them sign it) stating: that they were waiting to get an SSN from a worker who promised to bring it in on time and did not, that they were unaware all 1099s could be sent if one was incomplete (true if you didn't tell them); that this was the first time they have been charged with been late filing 1099s; that they believe this late charge is unfair and outrageously high -- more than some criminals are charged; that they are taxpaying citizens and voters who feel they are being treated unfairly; that they will very carefully monitor their 1099 forms in the future so that it will absolutely never happen again. Say that if this request is denied, then please furnish the name and address of the next highest official to whom they can further appeal and they are prepared to contact their congressman, the Honorable (Whoever), about this matter if necessary. Say please give this request serious consideration and reply as soon as possible. Thank you very much. Yours truly, John/Jane Doe.

[Snaggletooth]

Wish there were more penalties

For those of you who know my history, this sounds strange coming from me, who normally advocates the best treatment for the taxpayer.

Most of my business clients who make personal payments totally disregard what I tell them. If I were confronted with the situation encountered by the equine lady, I would have issued ALL 1099s, including one with a blank EIN#. I would not have held up the issuance of the rest of the 1099s for one problem. Then if the IRS had any heartburn, they would have focused on the recipient with the problem, and held the issuer responsible.

The time to acquire the proper EIN# and mailing address is BEFORE they have been paid. Most of my contractor-type customers ignore this and sometimes are not able to track down the information at years' end. Ultimately, the normal result is an order to either clear up the EIN or begin backup withholding. The contractors do not want to comply with an order to backup withholding, and even if they do, the recipient will quit right there on the spot and maybe even leave town.

[taxea]

Right on, Snaggle...I tell my clients to get the W9 before they put the person to work or be subject to the IRS possibly denying the expense with interest and penalty. This rule has been with us for years now and there is no reasonable excuse not to follow it and then expect to claim the expense.

[Jiggers]

Right on, Snaggle...I tell my clients to get the W9 before they put the person to work or be subject to the IRS possibly denying the expense with interest and penalty. This rule has been with us for years now and there is no reasonable excuse not to follow it and then expect to claim the expense.

In a small town where contractors, lawn maintenance workers (for business property), farm laborers and others are hard to find, you will find that many will refuse to provide their SS#. If the taxpayer wants to hire them, they will and not issue 1099's.

[TAXNJ]

Selection

In a small town where contractors, lawn maintenance workers (for business property), farm laborers and others are hard to find, you will find that many will refuse to provide their SS#. If the taxpayer wants to hire them, they will and not issue 1099's.

Which does the small town contractors select:

1 - take a deduction for cost of the workers without getting form 1099

2 - not take a deduction for cost of the workers without getting form 1099

If selection is #1 and the small town contractors is penalized $250 (recently raised from $100) for each non reported Form 1099:

1 - will they pay the penalty

2 - who do they blame for the penalty

[kathyc2]

I haven't used it often but I've pointed out the intentionally not reporting income is fraud and a felony, and that conspiring to defraud the US is also a felony, and a felony may include incarceration. After that W-9's seem to suddenly appear.

[Kram BergGold]

Appeal

You have nothing to lose by asking for an abatement. I would include the number of years 1099 forms were filed on time for this client and ask for a first time abatement as well as reasonable cause.

[buzzardbreath]

Who pays the Tax?

In a small town where contractors, lawn maintenance workers (for business property), farm laborers and others are hard to find, you will find that many will refuse to provide their SS#. If the taxpayer wants to hire them, they will and not issue 1099's.

Hi Jiggers - in my area there are small towns and rural counties galore, and what you say is true. However, if such a contractor won't give out 1099s, then I won't take the deduction. What it amounts to is the contractor ends up paying the taxes that his people refuse to report. And usually the contractor is in a higher tax bracket than the recipient. Many of them change their tune when faced with a huge tax bill. And I suppose I may have lost a customer or two on account of it. But if dealing with people who won't report their income, I have no apologies to make. [By the way, some of these people who refuse could take advantage of earned income credit but are too ignorant to know that]

Some of these folks have a remedy - they give a false SS#. This always gets caught and IRS writes a letter to the issuer culminating in backup withholding. Usually the recipients are long gone by then so they get away with it.