Legal Update: Taxation & Estate Planning

New IRS 1099 Question

by W. King Copler

A new question now appears on Schedule C and Schedule E of Form 1040, as well as Forms 1120, 1120S and 1065.  The questions are as follows:

1. Did you make any payments in 2011 that require you to file Form(s) 1099?
2. If "Yes", did or will you file all required Forms 1099?

This is not new as businesses (including rental properties) have been required to file Form(s) 1099 to a party that is paid for services, interest, rent, dividends, etc. in previous years.  This is the first time the IRS has required the taxpayer to answer questions as to those filings.  In the past, the issue has rarely come up.  The Form(s) 1099 are to be provided to the IRS by February 28, 2012, and to recipients by January 31, 2012

Other than law firms and medical practices, the form need not be filed for payments to corporations.  The form must be filed for payments to LLC's, Partnerships, Proprietorships and all other non-corporate entities.  This is not an exhaustive analysis.  More information can be found at www.irs.gov.

While our firm generally does not file Form(s) 1099 for taxpayers, we can do so if specifically asked.  If you have any questions, please contact your Chambliss, Bahner & Stophel tax professional at 423-756-3000.

You should also note if you do not have the recipient's taxpayer identification number you can be subject to 28% backup withholding.  You should use Form W-9 to get this number before making a payment.

IRS Circular 230 requires us to inform you that any statements contained in this letter are not intended or written to be used, and cannot be used, by you or any other taxpayer, for the purpose of avoiding any penalties that may be imposed by federal tax law.