Schedule Cs and 1099a
R & M Vaughn
Just noticed in notice from our district that IRS has
audited a Schedule C client and fined for failing to
file 1099s "for contract labor paid $600+. The fines
were $50 each for non-filing, $50 each for not
providing SSNs and 31% backup withholding. Auditor
said it is being done to set examples.
Schedule C filers and preparers take note.
Midge
Dale B. Miller
31% backup withholding. Am I missing something here? Do
you mean if the 1099 issuer does not have a SS# on file?
I would appreciate your comments.
Dale
R & M Vaughn
Sorry I do not have details, but will post when I get
them. It raises the interesting question for filer to
determine when he must file 1099s and when someone he
is paying is an independent contractor. Does anyone
out there know where to locate some guidelines on
this similar to the ones to figure out if you are an
employee or self employed? There are some expenses
that are clearly 1099s - some clearly not - and many
in the gray area - at least for me.
I'd appreciate any feedback.
Midge
H&R Block - but the opinions are mine.
Art Kamlet
R & M Vaughn <rmva...@ix.netcom.com> wrote:
> Just noticed in notice from our district that IRS has
> audited a Schedule C client and fined for failing to
> file 1099s "for contract labor paid $600+. The fines
> were $50 each for non-filing, $50 each for not
> providing SSNs and 31% backup withholding. Auditor
> said it is being done to set examples.
>
> Schedule C filers and preparers take note.
Two comments.
1. There's nothing new here (I'm not sure what is meant by
31% backup withholding in this context.)
2. Why would you think this applies only to schedule C filers?
An S-corp or other entity who fails to file 1099s on their
non-Corporation contractors should be subject to the same
rules.
--
Art Kamlet Columbus, Ohio kam...@infinet.com
Barry Rubin
mill...@ix14.ix.netcom.com says...
> R & M Vaughn wrote:
>> Just noticed in notice from our district that IRS has
>> audited a Schedule C client and fined for failing to
>> file 1099s "for contract labor paid $600+. The fines
>> were $50 each for non-filing, $50 each for not
>> providing SSNs and 31% backup withholding. Auditor
>> said it is being done to set examples.
>>
>> Schedule C filers and preparers take note.
> 31% backup withholding. Am I missing something here?
> Do you mean if the 1099 issuer does not have a SS# on
> file? I would appreciate your comments.
What Is Backup Withholding?-Persons making certain
payments to you must withhold and pay to the IRS 31% of
such payments under certain conditions. This is called
backup withholding. Payments that could be subject to
backup withholding include interest, dividends, broker and
barter exchange transactions, rents, royalties,
nonemployee pay, and certain payments from fishing boat
operators. Real estate transactions are not subject to
backup withholding.
If you give the requester your correct TIN, make the
proper certifications, and report all your taxable
interest and dividends on your tax return, your payments
will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS tells the requester that you furnished an
incorrect TIN, or
3. The IRS tells you that you are subject to backup
withholding because you did not report all your interest
and dividends on your tax return (for reportable interest
and dividends only), or
4. You do not certify to the requester that you are not
subject to backup withholding under 3 above (for
reportable interest and dividend accounts opened after
1983 only), or
5. You do not certify your TIN. See the Part III
instructions for exceptions.
Certain payees and payments are exempt from backup
withholding and information reporting. See the Part II
instructions and the separate Instructions for the
Requester of Form W-9.
--
b...@netpoint.net
http://www.netpoint.net/~br
d006...@dcfreenet.seflin.lib.fl.us
HUGBEARBOB
> It raises the interesting question for filer to
> determine when he must file 1099s and when someone
> he is paying is an independent contractor.
I really don't see where your confusion is on this.
There is nothing new here.
If you pay someone (not a corporation) more than $600
in a year for SERVICES provided to your business,
which are *not* provided as an employee, you have the
duty to file a Form 1099-MISC as non-employee
compensation.
If you do not, among the things the IRS *can* do is
assess penalties for failure to file a 1099 with them,
failure to provide a copy to the taxpayer, failure to
report his SS# on an information return so the dollars
can be matched to him, and - since you did not provide
the SS# - the backup withholding you would have been
responsible for if the person did not provide you with
a SS#.
Edward Zollars
R & M Vaughn <rmva...@ix.netcom.com> wrote:
: Sorry I do not have details, but will post when I get
: them. It raises the interesting question for filer to
: determine when he must file 1099s and when someone he
: is paying is an independent contractor. Does anyone
: out there know where to locate some guidelines on
: this similar to the ones to figure out if you are an
: employee or self employed? There are some expenses
: that are clearly 1099s - some clearly not - and many
: in the gray area - at least for me.
As others have noted, these rules are pretty
straight-forward. All payments made to individuals
for services by a business must be 1099'd if the
amounts paid during the year in total are in excess
of $600 to that individual, unless the individual is
having the amounts reported on a W-2 issued by that
business. Failing to file the 1099's will subject
the business to penalties (which you've run across).
Note that the due date for 1099's to be mailed out is
January 31, and the reports need to be filed (at least
for federal purposes) by the end of February. Therefore,
a business cannot simply wait until the business calendar
year tax return is prepared to have these completed--they
must be taken care of before year end. For that reason,
any entity paying out such amounts should consult with a
local tax professional that has experience in small
business payroll issues (see below for why payroll
experience is important <grin>).
A more common occurance is for the IRS to challenge
whether individuals that received a 1099 are actually
employees of the business, and should be reported on
a W-2. If the IRS wins that challenge, they get to
collect payroll taxes from the employer as well as
penalties for failing to file the information reports.
I would strongly suggest this client consult someone
to see if there is exposure on this issue before the
IRS payroll tax people start snooping around.
--
Ed Zollars, CPA Phoenix, Arizona
ezo...@primenet.com
Barry Rubin
b...@netpoint.net says...
[snip]
>What Is Backup Withholding?
[snip]
As a followup to my above article, text below WAS included
at the beginning but was not posted (it is even included
in my log file). It should make more sense knowing the
source:
> From IRS Form W-9 (3/94):