Discussion:Tax Preparer and 1099-MISC
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Discussion Forum Index --> Tax Questions --> Tax Preparer and 1099-MISC
| 26 February 2007 | |
| What is a tax preparer's responsibility with respect to 1099-MISC not issued by a contractor (or any business, for that matter)? Should the tax preparer not prepare the return, agree to prepare the return without including expenses for payments to contractors who haven't been issued 1099-MISC, or include the payments in expenses/basis but inform the client in writing that the IRS could disallow the deduction and assess a $50 penalty for each 1099-MISC not issued? | |
Tinley tax (talk|edits) said: | 26 February 2007 |
| I've been under the impression it is the tax payers responsibilty to issue 1099's. Additionally, I've taken the position that in the event of audit the tax payer can issue 1099's up to the eve of audit. I've had some tax payer's say they will take the risk and issue the 1099's latter if they get audited. | |
Green hunter (talk|edits) said: | 26 February 2007 |
| It's the taxpayers responsibility to issue the Form 1099, you on the other hand are preparing the tax return. I do not see how not issuing a 1099 prevents a deduction or vice versa. If I haven't issued a Form 1099 I am not denied a tax deduction so I don't see what precludes you from preparing the TR unless you have issues that relate to the clients ethics, then I certainly would walk away. | |
| 26 February 2007 | |
| I believe a tax preparer is not an auditor. If there is a substantiation for the expense then the expense should be allowed. Anyway if the payment is less than $600 a 1099Misc may not be issued. I will prepare the return but will inform the client that it is his responsibility to keep a record and take care of legal formaliites for his expenses. In case of audit he need to substantiate his deductions. | |
Rgtaxservice (talk|edits) said: | 26 February 2007 |
| It's not your responsibility to issue the 1099s for the client. I do however inform the client that the labor/wage amounts will be properly and separately classifed as Wages or Labor Costs (in COGS) and will not be hidden or bundled with other expenses. There are line items specifically for these.
I'm not an auditor. The deduction is allowable, so I give it to the client. He's responsible for substantiation. I had an almost new client this year who's old preparer buried 60K of 1099 'wages' in with material COGS. Never a direct mention of labor/wages on prior returns. That told me that this guy was cheating on taxes. I showed him the door. | |
| 26 February 2007 | |
| Great advice by all. However, for the advice concerning the client's responsibility for issuing the 1099's, I would put it in writing and have them sign to acknowledge receipt, or mail it to them via certified mail.
AJS: "believe a tax preparer is not an auditor." and Rgtaxservice: "I'm not an auditor." Absolutely correct, though sometimes I have to remind myself that I for the client now and don't work for IRS anymore. | |
| February 26, 2007 | |
| Yep, the early responses are a bit over the top. You cannot even issue 1099's without the information, which the client must provide. If he doesn't, and I'm not engaged specifically to prepare 1099's, what is that to me? Warn the client and move on. That does not mean that the expense isn't legitimate! So deduct. On audit, he'll have to prove the legitimacy of it and why he didn't file 1099's. | |
Rgtaxservice (talk|edits) said: | 26 February 2007 |
| Just to make sure I didn't go over the top with the client, I'll ask this. Wages/Labor do need to be clearly indentified as such don't then?
I understand that it's a legitimate expense. My gut tells me that if placed under wages or labor (cogs) then the IRS will be looking for w2s or 1099s. | |
| February 26, 2007 | |
| Agree totally. DOn't show anything as labor unless there are W2's in my opinion... | |
Rgtaxservice (talk|edits) said: | 26 February 2007 |
| JR1 - That's my point. By not having them in plain sight, instead buried in with another cost, then contractor gets to claim the deduction (as it should be)....but you and I as taxpayers) get screwed because the recipients of this 'unreported wages' don't pay any income or payroll tax on the money.
No sir. I don't like it one but. | |
