Discussion:1099 penalties
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Discussion Forum Index --> Tax Questions --> 1099 penalties
Actionbsns (talk|edits) said: | 18 December 2007 |
| I have a client with one particular individual who requires a 1099 and refuses to provide data. Last year they finally told him they wouldn't have him back unless he provides what they need. Turns out, his entertainment is valued highly so they did bring him back mid year. So now I'm drafting my year end letter to them and regarding 1099's, I wanted to copy something from IRS to accentuate the penalty issues they might incur. Problem is, the penalty for this isn't substantial enough to cause concern. $50 for accidently not issuing it, $100 for willful disregard. That's going to get them shaking in their boots. The penalty can go higher to 10% of certain amounts, but this guy is a DJ and doesn't appear to be included in the miscellaneous caveats. Then on my end, I have to be concerned about a much larger tax preparer penalty which could be assessed against me. Does anyone have any suggestions? | |
| 18 December 2007 | |
| give the client a W-9 and strongly suggest that he get A number on it signed by the DJ. If the number proves to be incorrect (as notified by the IRS), give him another W-9 next year. | |
Donniecastleman (talk|edits) said: | 18 December 2007 |
| Aren't they required to withhold 28% for not providing information or for foreign workers? I don't think they'd chase you down for it but I don't know if I'd be providing 1099 services if that was going on, that's just me. Another question to coincide with yours, if you have a name, address and amount, could you or should you still send in the 1099 with the missing information? Back years ago I was a bandleader for a Cincinnati band and I wrote out $100,000 worth of checks and I'm sure most of the shady musicians gave me bogus SS #'s. | |
Actionbsns (talk|edits) said: | 18 December 2007 |
| We had the STRONG conversation last year. I was shocked they brought this guy back and a little angry. They would be required to do backup withholding, but I just found out about them bringing him back and they weren't aware that they needed to be doing so. It goes on the 941 I think, but then the W-2 totals get all whacked out because they don't tie to the 941. I'm thinking of filling in the SSN with "Refused to provide" this year. The problem is really with the penalty - with all the discussion going on about Tax Gap and penalizing preparers so substantially, you would think this would be an area they would be seriously concentrating on since most of the gap lies in unreported, underground income. If I could tell these people it would cost them thousands of dollars, or even hundreds of dollars, they'd sure perk up and pay more attention. | |
| December 18, 2007 | |
| Action, I recently saw something about penalties going up for information returns. It may have been 1065s, but I'm pretty sure 1099s were included in there.
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| 18 December 2007 | |
| Backup withholding applies here. See the General Instructions for 1099. Upon audit, IRS can assess it upon the payer. | |
| December 18, 2007 | |
| Yes it applies. Would you recommend to your client at this point, assuming all payments for 2007 have been paid, that they now pay the 28% even though it hasn't been withheld? | |
Southparkcpa (talk|edits) said: | 18 December 2007 |
| I don't think we as preparers are liable, if they don't get us the info etc... but put in in writing, send them a letter and W9.
I just finished an audit where I represented a live perfomance venue and MANY MAMY musicians are paid in cash because they won't take a check. The IRS disallowed the deduction for some payments where a 1099 was not issued. Preparer penalties were never on the IRS radar BUT they were very concerned about the cash but my client sent 1099's to most of them. Some came back with incorrect ID's etc... | |
Actionbsns (talk|edits) said: | 19 December 2007 |
| Thanks for the feedback. I just added an addendum to my year end letter regarding deducting 28% from this guy's payments and withholding payments the rest of this year in payment of the potential 28% that would be due for 2007 until or unless he completes the W-9 which I also enclosed. I also included the complete copy of the General Instructions for 1099 with the pages that address this marked and highlighted. One phrase might get their attention because it says that IRS could hold them responsible for the 28% as the payors even if they hadn't withheld it. They aren't having as good of a year as last year, so that kind of penalty could really hurt. I can't really do more than that. | |
| December 19, 2007 | |
| . . . other than fire them. Let's hope it doesn't come to that. | |
PHIL MOODY (talk|edits) said: | 19 December 2007 |
| I think some states have backup withholding also. | |
| 19 December 2007 | |
| I thought foreign workers who have no tax status in the USA are not subject to with holding even without a 1099. Like em programmer contractors from Singapore? | |
