How Will You Answer These Two Questions?

By: Gregg McCumber, CPA - Partner and Richard Walker, CPA - Partner (Posted: 1/3/2013)

Beginning with the filing of the 2011 individual income tax returns and various entity returns, taxpayers were required to answer the following two questions. These same two questions also appear for tax year 2012.

  1. Did the taxpayer make payments during the year that required the filings of Form 1099-MISC for such payments?
  2. Did the taxpayer issue and file all required Forms 1099-MISC?

Forms 1099-MISC are required to be prepared by all business entities and individuals (for profit and nonprofit) who make payments that total $600 or more during the tax year to any payee who is an individual or partnership with respect to the performance of personal services, rents for tangible and real properties, and royalties. Such forms must be provided to all payees by January 31st of the following tax year and filed with the IRS no later than February 28th.

The penalties for failure to timely file such forms with the IRS are as follows:

Penalties can increase if the IRS determines the taxpayer willfully disregarded the rules for filing these required forms. Proof of intentional disregard is supported where the taxpayer fails to truthfully answer the questions above. Therefore, we strongly recommend that all taxpayers who are required to file Form 1099-MISC for 2012 prepare to do so in a timely manner by requesting (if not already done) a completed Form W-9 from each vendor and payee. The completed W-9 contains the information necessary for taxpayers to prepare Forms 1099-MISC and thus comply with the IRS filing requirements.

Please contact your Burton McCumber & Cortez, LLP service provider if you have any questions or need additional information.