Client did not send in 1099s for 2005...

[Hamacher]

I have a client that just realized he did not prepare 1099s for 2005. Should he go back and prepare them now?

[taxea]

Client did not send in 1099s for 2005.

Whomever is the receiver of the delayed 1099's will have to amend their tax returns. I would definately do it with a letter of apology for the late filings. taxea

[S T]

Sharing

Future years down the road, if T/P is audited for the 2005 return and the auditor finds out that the 1099 forms were not filed, they will disallow all subcontractor/commission, etc deductions in excess of $600 to each person.

So you might want to protect that deduction and file the 1099 forms late. I have not experienced "yet" where the IRS has imposed late filing penalties, but I do believe the time is fast approaching.

Just try to have your T/P in compliance.

Sandy

[Jiggers]

Late 1099's

Whomever is the receiver of the delayed 1099's will have to amend their tax returns. I would definately do it with a letter of apology for the late filings. taxea

Shouldn't the receiver of the delayed 1099's have reported the income on their 2005 returns already? Just because you didn't receive a 1099 is no excuse for not reporting the income.

Does that mean that just because you don't receive a 1099 from all of your clients for preparing their tax returns that you only report the income from those that send you one?

[Black Bart]

Late 1099s

I have a client that just realized he did not prepare 1099s for 2005. Should he go back and prepare them now?

Although it's preferable to let sleeping dogs lie, I'd present Client with the options and let him/her make the call. Those people knew tax was owed, 1099 or not. Having said that; some pay, some don't, and Client will catch a lot of flak from non-reporters when they get the form or when IRS match-up CP-something letters start going out this summer. The issue (and penalties) will come up if he's audited; otherwise not likely.

[Bucky]

I would prepare them, charge the client and tell him/her the consequences they face both with filing and without. If you tell them not to file and he gets nailed it will be your fault. The receivers should have claimed the income whether or not they got a 1099.

[OldJack]

Well... the decision of filing year old form 1099s is that of the taxpayer, however, in my judgment it is plain foolish!

This would be like going to the police station, demanding that they arrest you, and give you a speeding ticket. Is your taxpayer really that stupid.

[JoshinNC]

There could be civil penalties also,

I have a client who is delinquent on 941 payments for '02 and failed to send the W-3 to the SSA (although he did send the W-2's to the employees). He has been his with $4400 in civ pens that we are trying to deal with (using the ignorance excuse), since he did send out the W-2's to the employees. Luckily, the employees have been willing to turn over copies of tax returns to prove that they filed the income on their returns. I know this is a little different from the 1099 issue, but still shows that under scrutiny, the IRS will adminster penalties.

[Black Bart]

Ha Ha

Well... the decision of filing year old form 1099s is that of the taxpayer, however, in my judgment it is plain foolish!

This would be like going to the police station, demanding that they arrest you, and give you a speeding ticket. Is your taxpayer really that stupid.

Hey Jack,

You shouldn't "soft-soap" these guys like this -- breaking the news gently and letting them down easy. Why don't you just give it to them straight?

[OldJack]

I know this is a little different from the 1099 issue, but still shows that under scrutiny, the IRS will adminster penalties.

Payroll taxes are a whole different ballgame! The IRS position is that the day you write that payroll check those taxes are in trust and are the property of the United States Treasury. You fail to pay those trust taxes and they have authority to put a padlock on your door, sieze your property, and/or clean out your bank account. Of course they have to give notice, in most cases, but taxpayers have a way of disregarding those notices until they mention the problem to you. You should advise your clients that one should not borrow payroll taxes from the IRS.

[OldJack]

So you might want to protect that deduction and file the 1099 forms late.

Not deductible unless they file form 1099 is only a little fib we tell the taxpayers to help get them to do what they should.

Truth is, if the expense would be deductible with the filing of a 1099 it is still deductible without the 1099 filing. The only penalty the IRS can issue is for failing to file an information document (1099) and that penalty is only $50 per form 1099 with a max of $100,000 for a small business. Most small business could easily afford the penalty.

[taxea]

I can only report what the client provides to me. If they don't declare the income I can't report it and you would obviously be surprised at how many people "don't remember" they got the income.
If, however, I am aware of the income that isn't being reported, I remind them. But this is usually bank interest or investment monies. I have no way of knowing how much they take in as I don't do their bookkeeping. My only reference is that I put specific detail on the tax return so the following year I know from where they reported the previous year.
I'm with Black Bart, you can only advise them of the law and what the options or consequences are.
Case in point is the client who only has tax free dividends. They don't understand that the income has to be recorded on their return and then backed out as non-taxable. If I had not detailed the prior year Sch B they would be getting a non-disclosure of income letter from the IRS. I would rather do it right the first time than charge for an amended return.
taxea

[Davc]

Not deductible unless they file form 1099 is only a little fib we tell the taxpayers to help get them to do what they should.

Truth is, if the expense would be deductible with the filing of a 1099 it is still deductible without the 1099 filing. The only penalty the IRS can issue is for failing to file an information document (1099) and that penalty is only $50 per form 1099 with a max of $100,000 for a small business. Most small business could easily afford the penalty.

The Oregon Dept of Revenue has stated they will disallow expenses for which a 1099 or W-2 should have been issued.