Posts Tagged ‘1099s’

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Is It January 9th Yet?

Friday, January 20th, 2023

Last year, the IRS announced a new system for efiling 1099s (and other information returns) called IRIS.  This system would be available for both professionals and individuals (and businesses) to efile 1099s.  The system was supposed to be available on January 9th.  On January 9th the webpage noted, “…[Y]ou can log in to IRIS starting mid-January 2023.”  Well, today is January 20th and the system still isn’t available.

(I do need to note you must have an IRS IRIS Transmitter Control Code (TCC) to use IRIS.  You can apply for one via a link on the IRIS webpage.)

The deadline for mailing most information returns remains January 31st–and that’s 21 days away.  We are back using the IRS FIRE system (this system is not available to the general public) for one more year as it appears we have no options.  There are many services you can find that will file 1099s, but we have batches of 1099s for our clients that need filing.

Perhaps the original announcement of the IRIS system was correct: the IRS simply didn’t note which year the system would be up on.  After all, there’s a January 9th in 2024, too.

UPDATE: The IRS’s IRIS system went live earlier this week.

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Posted in Information Returns, IRS | Comments Closed

It’s Time to Generate 2021 1099s

Tuesday, January 4th, 2022

It’s time for businesses to send out their annual information returns. These are the Form 1099s that are sent to to vendors when required. Let’s look first at who does not have to receive 1099s:

  • Corporations (except attorneys)
  • Entities you purchased tangible goods from
  • Entities you purchased less than $600 from (except royalties; the limit there is $10)
  • Where you would normally have to send a 1099 but you made payment by a credit or debit card

Otherwise, you need to send a Form 1099 to the vendor. The best way to check whether or not you need to send a 1099 to a vendor is to know this before you pay a vendor’s invoice. I tell my clients that they should have each vendor complete a Form W-9 before they pay the vendor. You can then enter the vendor’s taxpayer identification number into your accounting software (along with whether or not the vendor is exempt from 1099 reporting) on an ongoing basis.

Form 1099-NECs have a filing deadline of January 31, 2022 (for reporting 2021 nonemployee compensation). Form 1099-MISCs are used for all other 1099 reporting except interest, dividends, capital gains, etc. Payments of rent, royalties, advertising, crop insurance proceeds, substitute payments in lieu of dividends, attorney proceeds, other income (including gambling winnings not reportable on a Form W-2G), and nonqualified deferred compensation are just some of the items reported on a Form 1099-MISC.

Remember that besides the 1099 sent to the vendor, a copy goes to the IRS. If you file by paper, you likely do not have to file Form 1099-MISC with your state tax agency (that’s definitely the case in California). However, if you file 1099s electronically with the IRS you most likely will also need to file them electronically with your state tax agency (again, that’s definitely the case in California). It’s a case where paper filing might be easier than electronic filing.

IMPORTANT: The IRS is not sending Form 1099-NECs to state tax agencies. Thus, if you have a state filing requirement for your Forms 1099-NEC, you must separately file this with your state tax agency.

If you wish to file paper 1099s, you must order the forms from the IRS. The forms cannot be downloaded off the Internet. Make sure you also order Form 1096 from the IRS. This is a cover page used when submitting information returns (such as 1099s) to the IRS.

Note also that sole proprietors fall under the same rules for sending out 1099s. Let’s say you’re a professional gambler, and you have a poker coach that you paid $650 to last year. You must send him or her a Form 1099-NEC. Poker players who “swap” shares or have backers also fall under the 1099 filing requirement (issuing form 1099-MISC).

Remember, the deadline for submitting 1099-NECs for “Nonemployee Compensation” (e.g. independent contractors) to the IRS is now at the end of January: Those 1099s must be filed by Monday, January 31st.

Here are the deadlines for 2021 information returns:

  • Monday, January 31st: Deadline for mailing most 1099s to recipients (postmark deadline);
  • Monday, January 31st: Deadline for submitting 1099-NECs for Nonemployee Compensation to IRS;
  • Monday, February 28th: Deadline for filing other paper 1099s with the IRS (postmark deadline);
  • Tuesday, March 15th: Deadline for mailing and filing Form 1042-S; and
  • Thursday, March 31st: Deadline for filing other 1099s electronically with the IRS.

Remember, if you are going to mail 1099s to the IRS send them certified mail, return receipt requested so that you have proof of the filing.

Also note that most 1099s must be mailed to recipients. Mail means the postal service, not email. The main exception to this is if the recipient has agreed in writing to receiving the 1099 electronically. I consider this the IRS’s means of trying to keep the Post Office in business.

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Posted in Information Returns, IRS | Comments Closed

It’s Time to Generate Those 2018 1099s

Tuesday, January 15th, 2019

It’s time for businesses to send out their annual information returns. These are the Form 1099s that are sent to to vendors when required. Let’s look first at who does not have to receive 1099s:

  • Corporations (except attorneys)
  • Entities you purchased tangible goods from
  • Entities you purchased less than $600 from (except royalties; the limit there is $10)
  • Where you would normally have to send a 1099 but you made payment by a credit or debit card

Otherwise, you need to send a Form 1099-MISC to the vendor. The best way to check whether or not you need to send a 1099 to a vendor is to know this before you pay a vendor’s invoice. I tell my clients that they should have each vendor complete a Form W-9 before they pay the vendor. You can then enter the vendor’s taxpayer identification number into your accounting software (along with whether or not the vendor is exempt from 1099 reporting) on an ongoing basis.

Remember that besides the 1099 sent to the vendor, a copy goes to the IRS. If you file by paper, you likely do not have to file with your state tax agency (that’s definitely the case in California). However, if you file 1099s electronically with the IRS you most likely will also need to file them electronically with your state tax agency (again, that’s definitely the case in California). It’s a case where paper filing might be easier than electronic filing.

If you wish to file paper 1099s, you must order the forms from the IRS. The forms cannot be downloaded off the Internet. Make sure you also order Form 1096 from the IRS. This is a cover page used when submitting information returns (such as 1099s) to the IRS.

Note also that sole proprietors fall under the same rules for sending out 1099s. Let’s say you’re a professional gambler, and you have a poker coach that you paid $650 to last year. You must send him or her a Form 1099-MISC. Poker players who “swap” shares or have backers also fall under the 1099 filing requirement.

Remember, the deadline for submitting 1099-MISCs for “Nonemployee Compensation” (e.g. independent contractors) to the IRS is now at the end of January: Those 1099s must be filed by Thursday, January 31st.

Here are the deadlines for 2018 information returns:

  • Thursday, January 31st: Deadline for mailing most 1099s to recipients (postmark deadline);
  • Thursday, January 31st: Deadline for submitting 1099-MISCs for Nonemployee Compensation to IRS;
  • Thursday, February 28th: Deadline for filing other paper 1099s with the IRS (postmark deadline);
  • Friday, March 15th: Deadline for mailing and filing Form 1042-S; and
  • Monday, April 1st: Deadline for filing other 1099s electronically with the IRS.

Remember, if you are going to mail 1099s to the IRS send them certified mail, return receipt requested so that you have proof of the filing.

Also note that most 1099s must be mailed to recipients. Mail means the postal service, not email. The main exception to this is if the recipient has agreed in writing to receiving the 1099 electronically. I consider this the IRS’s means of trying to keep the Post Office in business.

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Posted in Information Returns, IRS | Comments Closed

It’s One 1099 Per Person, Or the Most Stupid and Hilarious Thing I’ve Seen in Some Time

Friday, September 29th, 2017

One of my clients, Barri Brown (all names in this post are fictitious), was missing a 1099 issued by one of the two large Daily Fantasy Sports (DFS) companies. It didn’t show on her Wage & Income Transcript, so she called their accounting department and requested a copy. A few days later they emailed it to her. She forwarded it on to me and I entered it into her return.

And then I took a look at the pdf and saw that it was 18 pages long. I wondered what kind of attachments this company would send on a 1099? Perhaps a breakout of state tax issues (although that didn’t apply to my client). Or perhaps some internal accounting records detailing Ms. Brown’s profits and losses.

How about the 1099s for everyone this company serviced with the last name of Brown? The second page is that of Brett Brown, the third page is Daniel Brown, etc. At least only the last four digits of the social security numbers were shown (but both my client and I know the exact amount of Brett Brown’s DFS income from this site in 2016).

In one way, this is hilarious. Apparently it was easier for that clerk to email the 1099s for all the Browns to my client than to just send the specific 1099. (I have to wonder about how they create their 1099s, but that’s a question for another day.)

In another way, it’s stupid. Hasn’t this company heard of privacy concerns and laws? My client has every right to know her income, but absolutely no right to know Brett Brown’s income (unless Mr. Brown elects to tell one of us).

But my client asked a very good question. “That is HILARIOUS and absurd and maybe illegal?” I’m not an attorney, so I can’t state with certainty whether this was a violation of the law. The reality is that this was almost certainly a stupid error, and there wasn’t the intent to do something illegal.

(Tax professionals fall under the provisions of the Federal Trade Commission Act. If a tax professional were to deliberately do this, it definitely could be a violation of the FTC Act.)

Unfortunately, the data breach at Equifax and this act of stupidity reinforce my belief that businesses need reminders to treat data security very seriously. My client used an Employer Identification Number (EIN) with the DFS company; I strongly recommend that sole proprietors (like my client) do that whenever possible. A stolen EIN (for a sole proprietor) can’t be used to file a personal tax return.

Let me give a helpful hint to those issuing 1099s and sending them out: It’s one to a customer. Barri Brown doesn’t need Steven Brown’s 1099. Luckily for this company, my client is able to laugh this off (as am I). The problem is that if this happened to Ms. Brown, it likely happened to Mr. Nelson and others.

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Posted in Gambling, Information Returns | 1 Comment »

2017 Mailbag #2: The Case of the Deliberately Wrong 1099

Sunday, January 29th, 2017

Our second mailbag post deals with an issue I’ve reported on before: an incorrect information return. Once again, there’s a twist.

In 2015 I did some consulting for them and was paid $10,000; I received a 2015 Form 1099-MISC that correctly noted the income. I just received a 1099-MISC from them for 2016; however, I didn’t do any work for them in 2016. I called them and there response to my asking them to correct the error was “no.” What should I do?

The advice I gave before still applies:

But what if he refuses [to correct the 1099? Here, practicality must be used. Let’s say the total of your gross receipts is $32,000, and the total of your 1099-MISCs (and 1099-Ks) is $29,000. I’d likely just enter the 1099-MISC as received, and lower the “other” gross receipts by the extra $3000. (IRS instructions on information returns state to use the actual number. The problem is that the automated underreporting (AUR) unit will almost certainly send you a notice if you use the wrong number.)

Unfortunately, my correspondent’s total of her correct 1099s exactly equals her gross receipts so this strategy won’t work. I think there are two things she should do. First, send a letter (via certified mail) to the issuer of the incorrect 1099 explaining the situation and requesting that they issue a corrected 1099. Make sure you keep a copy of the return receipt (or tracking).

Second, consider including the 1099 on your tax return and then subtracting out the income (as a “return and allowance”). The IRS suggests (in this situation) that you subtract it out within gross receipts; the problem with that is that you’re almost certain to get an AUR notice. This method is less likely to generate an IRS notice, and your income is still being accurately reported.

What if you’re unlucky enough to get an IRS notice or be audited on this issue? Most of the time the burden of proof is on you, not the IRS; however, with information returns the burden of proof is on the IRS. The only evidence of my correspondent earning this “income” is the Form 1099-MISC. She has a separate bank account for her business; her bank deposits in 2016 exactly equal her gross receipts. Everything backs her story.

Congress changed the law on when 1099s for nonemployee compensation (independent contractors); those 1099s must now be filed by Tuesday, January 31st. One unforeseen consequence for tax professionals (and for recipients of 1099s) is that there will be more issues with incorrect 1099s this year. Hopefully the IRS’s performance on dealing with corrected 1099s will improve. If not, we’ll be dealing with a score of IRS notices on this issue next year.

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Posted in IRS | Comments Closed

On 1099 Due Dates in 2017

Tuesday, October 4th, 2016

You may have heard that Form 1099-MISC’s must be filed earlier next year. That’s true, but it only impacts some of the 1099s. Let’s look at the IRS instructions:

New filing date. Public Law 114-113, Division Q, section 201, requires Form 1099-MISC to be filed on or before January 31, 2017, when you are reporting nonemployee compensation payments in box 7. Otherwise, file by February 28, 2017, if you file on paper, or by March 31, 2017, if you file electronically. The due dates for furnishing payee statements remain the same.

What this means is that only 1099-MISC’s for independent contractors (nonemployee compensation) must be filed by January 31st, whether you file by paper or electronically. All other information returns, including 1099-MISC’s reporting “Other Income,” will have the same deadlines as this past year: paper returns on or before February 28th, and electronic on or before March 31st.

I’m certain there will be confusion this coming year over the deadline. Of course, there’s no penalty for filing all your information returns by January 31st (whether required or not).

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Posted in IRS | Comments Closed

1099 Time for 2016

Sunday, January 10th, 2016

It’s time for businesses to send out their annual information returns. These are the Form 1099s that are sent to to vendors when required. Let’s look first at who does not have to receive 1099s:

  • Corporations (except attorneys)
  • Entities you purchased tangible goods from
  • Entities you purchased less than $600 from (except royalties; the limit there is $10)
  • Where you would normally have to send a 1099 but you made payment by a credit or debit card

Otherwise, you need to send a Form 1099-MISC to the vendor. The best way to check whether or not you need to send a 1099 to a vendor is to know this before you pay a vendor’s invoice. I tell my clients that they should have each vendor complete a Form W-9 before they pay the vendor. You can then enter the vendor’s taxpayer identification number into your accounting software (along with whether or not the vendor is exempt from 1099 reporting) on an ongoing basis.

Remember that besides the 1099 sent to the vendor, a copy goes to the IRS. If you file by paper, you likely do not have to file with your state tax agency (that’s definitely the case in California). However, if you file 1099s electronically with the IRS you most likely will also need to file them electronically with your state tax agency (again, that’s definitely the case in California). It’s a case where paper filing might be easier than electronic filing.

If you wish to file paper 1099s, you must order the forms from the IRS. The forms cannot be downloaded off the Internet. Make sure you also order Form 1096 from the IRS. This is a cover page used when submitting information returns (such as 1099s) to the IRS.

Note also that sole proprietors fall under the same rules for sending out 1099s. Let’s say you’re a professional gambler, and you have a poker coach that you paid $650 to last year. You must send him or her a Form 1099-MISC. Poker players who “swap” shares or have backers also fall under the 1099 filing requirement.

Finally, there are strict deadlines with information returns. Here are the deadlines for 2014 information returns:

  • Monday, February 1st: Deadline for mailing most 1099s to recipients;
  • Monday, February 29th: Deadline for filing paper 1099s with the IRS (postmark deadline); and
  • Thursday, March 31st: Deadline for filing 1099s electronically with the IRS.

Remember, if you are going to mail 1099s to the IRS send them certified mail, return receipt requested so that you have proof of the filing.

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Posted in IRS | 2 Comments »

The Tax Court Looks for $1,410 in Dividends

Wednesday, January 7th, 2015

Today I generated my first 1099s for clients. The Tax Court looked at a case where the petitioners said they didn’t receive three $470 dividends. The issuer said they sent the checks and a Form 1099-DIV. Who was right?

In the case of information returns, the burden of proof can shift to the IRS.

If a taxpayer asserts a reasonable dispute with respect to any item of income reported on a third-party information return and the taxpayer has fully cooperated with the Secretary, the Secretary has the burden of producing reasonable and probative information concerning that deficiency in addition to such information return.

But the Court never looked at that as it based its decision on “the preponderance of the evidence.”

The only evidence that the IRS had was a letter from Computerserve (the registered agent for BNSF, the company that might or might not have issued the dividends) that said they were issued and that a 1099-DIV was sent to the petitioner.

Petitioner husband has made numerous unsuccessful attempts in recent years to contact Computershare and Wells Fargo regarding various matters relating to his BNSF stockholdings, including payment of the disputed dividends…

Petitioner husband testified that petitioners did not receive the disputed dividend payments in 2009 or a Form 1099-DIV reporting those payments and that he does not recall having negotiated any checks. His testimony included details regarding the acquisition of BNSF by Berkshire Hathaway and his persistent but unsuccessful attempts to make inquires with Computerserve and Wells Fargo about the disputed dividend payments. He called the phone number provided in the February 28, 2014, letter, but was unable to speak to anyone regarding that
letter…

Petitioner husband has devoted a substantial amount of time to contest the relatively small amount of tax liability at issue here, and he testified consistently, clearly, and with considerable conviction in explaining the negative–that he did not receive the disputed dividend payments. He has persuaded us that he did not receive the disputed dividend payments in 2009.

I suspect that the petitioner had documentation of his phone calls to Computerserve and Wells Fargo. If you do ever find yourself in such a situation, keep good records of your attempts to obtain information.

In any case, this case does show that when there’s an incorrect information return (a 1099) it is possible to dispute it and win. It would have been a lot easier for the petitioners if they could have reached someone at Computerserve or Wells Fargo and explain their situation but we have to treat life as it is, not as we want it to be.

Case: Ebert v. Commissioner, T.C. Memo 2015-5

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Posted in Tax Court | 1 Comment »

1099 Time (2015 Version)

Saturday, January 3rd, 2015

As we start 2015, we’re running some repeats of important issues.

It’s time for businesses to send out their annual information returns. These are the Form 1099s that are sent to to vendors when required. Let’s look first at who does not have to receive 1099s:

  • Corporations (except attorneys)
  • Entities you purchased tangible goods from
  • Entities you purchased less than $600 from (except royalties; the limit there is $10)

Otherwise, you need to send a Form 1099-MISC to the vendor. The best way to check whether or not you need to send a 1099 to a vendor is to know this before you pay a vendor’s invoice. I tell my clients that they should have each vendor complete a Form W-9 before they pay the vendor. You can then enter the vendor’s taxpayer identification number into your accounting software (along with whether or not the vendor is exempt from 1099 reporting) on an ongoing basis.

Remember that besides the 1099 sent to the vendor, a copy goes to the IRS. If you file by paper, you likely do not have to file with your state tax agency (that’s definitely the case in California). However, if you file 1099s electronically with the IRS you most likely will also need to file them electronically with your state tax agency (again, that’s definitely the case in California). It’s a case where paper filing might be easier than electronic filing.

If you wish to file paper 1099s, you must order the forms from the IRS. The forms cannot be downloaded off the Internet. Make sure you also order Form 1096 from the IRS. This is a cover page used when submitting information returns (such as 1099s) to the IRS.

Note also that sole proprietors fall under the same rules for sending out 1099s. Let’s say you’re a professional gambler, and you have a poker coach that you paid $650 to last year. You must send him or her a Form 1099-MISC. Poker players who “swap” shares or have backers also fall under the 1099 filing requirement.

Finally, there are strict deadlines with information returns.  Here are the deadlines for 2014 information returns:

  • Monday, February 2nd: Deadline for mailing most 1099s to recipients;
  • Monday, March 2nd: Deadline for filing paper 1099s with the IRS (postmark deadline); and
  • Tuesday, March 31st: Deadline for filing 1099s electronically with the IRS.

Remember, if you are going to mail 1099s to the IRS send them certified mail, return receipt requested so that you have proof of the filing.

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Posted in Gambling, IRS | 1 Comment »

It’s Only $1,300; Do You Really Have To Send Me the 1099?

Sunday, January 26th, 2014

The deadline for mailing 1099s to recipients is this coming Friday, January 31st. That’s a postmark deadline. If you mail a 1099 on Friday and it takes two weeks to get to the recipient, that’s not a problem. (Well, it is a problem for the postal service, but not the sender.)

One of my clients sent a Form W-9 to an individual; that individual received $1,300 from my client so a 1099-MISC needs to be sent. The individual responded, “It’s not much money–it’s only $1,300. Can’t you just skip sending the 1099?” As I told my client, the answer should be no.

A few years ago the IRS wised up and added questions on business forms, such as Schedule C:

You now have to answer a question whether or not you made any payments in 2013 that would require you to file a 1099 (Question I); Question J asks, “If ‘Yes,’ did you or will you file required Forms 1099?” It’s pretty obvious that my client needs to check the “yes” box to Question I. Checking “no” on Question J after checking “yes” on Question I is an excellent way of asking the IRS, “Can you please audit me?”

I suspect the recipient would prefer that $1,300 be under-the-table. My client and I agree that we’re going to obey the law and issue the 1099. (He did receive the completed Form W-9.) As a reminder, if someone refuses to complete a Form W-9 you must begin backup withholding. I also suspect that reminding the recipient of that detail influenced his decision to complete the Form W-9.

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Posted in IRS | 1 Comment »

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