The IRS has added new questions to all business tax returns requiring us, as preparers, to acknowledge whether or not required Form(s) 1099 were filed. The specific questions are:

1) Did you make any payments in 2011 that would require you to file Form(s) 1099?

Yes____ No ____

2) If “Yes”, did you or will you file all required Form(s) 1099?

Yes____ No____

We don’t know why the IRS has added these questions to the return. As always, we recommend compliance with direct IRS requirements. The penalty for noncompliance is $50 per 1099 form that is not filed or is filed late. The bigger issue seems to be the IRS’s absolute denial of deductions unless the taxpayer provides proof of filing Form(s) 1099.  The IRS assumed this position in a recent court case. We do not agree that they should be able to take this position. However, it is an all too common practice for the IRS to deny a deduction that did not have the required documentation.

The deadline for filing 1099’s is fast approaching. If you have not already done so, please contact us if you need any assistance in meeting the Form(s) 1099 filing requirements. If we do not prepare your 1099s, please answer the above questions and return this memo back to us to document your file. As a reminder Form W-9 is the form you can use to document information needed for contract workers and service providers.