A:Here
are the 1099 rules:
·
First of all, all businesses are required to
file 1099’s to a person or a business (that is not incorporated) for any
services that are provided of $600 or greater during the calendar year.
·
Also, the same would be true for a business
paying rent to a person or a business that was not incorporated.
Starting this year the IRS has added additional questions to
all tax returns.
They are:
1. Are
you required to file form(s) 1099’s? yes or
no
2. If
yes, are you or will you be filing form(s) 1099’s? yes or no
These are questions that we will need to answer every year
on all returns.
I must warn you, if you should be chosen for audit they will
be looking to make sure that you filed your 1099’s. The fine for not filing is really high.
They can fine the business $250 per 1099 that was not filed. So for
example, if a business was required to prepare 10 1099’s and did not and the
auditor goes back 3 years (and the same number of 1099’s were required
then), they could actually access $2500 (10 x $250) x 3 years or
$7500 in penalties just for not filing 1099’s.
Also, it is recommended that anybody you pay as a contractor
or anybody for any type of service, you are required to have the contractor /
person fill out a Form W-9 and sign. This is basically paperwork that
says you do not have to withhold backup withholding. It would be a good
practice to obtain these forms and keep in your permanent records. You do not have to file them with the IRS.
If you have any questions, please feel free to contact us.
