1099's

[Jiggers]

Denied deduction

ODOR will deny the deduction on audit if no 1099s were issued. Stated Policy.

If this is a state agency, are you saying that the deduction was disallowed as contract labor and that these were employees and subject to suta?

I have had this happen in Texas during a state unemployment tax audit. The contract laborers, no 1099's were issued, were reclassified as employees for suta.

[Davc]

I'm guessing: Oregon Department Of Revenue

Correct. Though for some reason they never use the acronym when speaking.

[Davc]

If this is a state agency, are you saying that the deduction was disallowed as contract labor and that these were employees and subject to suta?

I have had this happen in Texas during a state unemployment tax audit. The contract laborers, no 1099's were issued, were reclassified as employees for suta.

I
f neither W-2s or 1099s were issued all payments overthe 1099 threshold are disallowed as an expense in audit.

[Bees Knees]

P.S. I still don't believe you can't take a deduction you've paid for (BEES--anything out there cite-wise?)

I can't cite a negative. Reg. Sec. 301.6722-1 is the IRS authority to impose a penalty for failure to issue a 1099. Generally the penalty is $50 for each failure to issue a 1099. The total amount of penalty that can ever be imposed on any person for all failures during a year is $100,000. However, that amount can increase for intentional disregard of the requirement to furnish timely correct payee statements.

Nothing in that reg says the deduction is disallowed for failure to issue a 1099. However, I think $100,000 is a whole lot worse than losing your deduction.