We’ve noticed another change associated with 1099s. Each of the 2011 business income tax forms now contain two new questions. Business taxpayers who are likely to have some responsibility to issue 1099 forms, must answer the questions.

Two New Questions on Form 1099 Filing: CliftonLarsonAllen LLP

  • 1/19/2012

Two New Questions on Form 1099 Filing

Earlier this month, we sent a message regarding the new Form 1099-K, the merchant card reporting form. We’ve noticed another change associated with 1099s. Each of the 2011 business income tax forms now contain two new questions:

  • Did you make any payments in 2011 that would require you to file Form(s) 1099?
  • If “Yes,” did you or will you file all required Forms 1099?

These questions appear on Schedules C, E, and F of Form 1040 and Forms 1120, 1120S, and 1065.

“The IRS has reported that the ‘tax gap,’ the under-reporting of tax liability, continues to grow,” says Chris Hesse, a tax partner with CliftonLarsonAllen. “The IRS knows that amounts reported to it from third parties are much more likely to be accurate. Consequently, business taxpayers who are likely to have some responsibility to issue 1099 forms, must answer the questions.”

Filing due dates

The forms are to be sent to the recipients by January 31 in most cases, and are due to the IRS by February 28, 2012 (not February 29). If filed electronically, the IRS copy isn’t due until April 2, 2012.

Penalties

“These two questions require income tax preparers to ask their clients about 1099 compliance,” says Don Frank, partner-in-charge of outsourcing with CliftonLarsonAllen. Answering questions on the tax forms is providing information under penalties of perjury. Substantial penalties may be imposed for incorrect answers. “Failing to file Forms 1099, even if only a handful of them are required, has become more consequential,” notes Frank. That could be up to $250 for each 1099 that the IRS doesn’t receive.

Filing thresholds

Most taxpayers are familiar with the most common 1099 forms. Payors are required to report to the IRS and the recipients if payments during the calendar year exceed the minimum amounts below:  

Purpose of Information Return IRS Form Minimum Reporting Amount
For services rendered by noncorporate businesses (i.e., sole proprietorships, partnerships and LLCs)   Form 1099-MISC

$600
For payments to attorneys Form 1099-MISC $600
For prizes and awards   Form 1099-MISC   $600  
For taxable dividends from earnings and profits   Form 1099-DIV   $10  
For taxable interest income   Form 1099-INT   $10  
For cancelation of indebtedness if involved in the business of lending money   Form 1099-C   $600  
For acquisition or abandonment of property that is security for a debt for which you are the lender   Form 1099-A   $600  
(Corporations only) For control changes or for shareholders who receive cash, stock, or other property upon a substantial change in the capital structure   Form 1099-CAP   Generally $1,000  

How we can help

There are other scenarios that may subject your entity to 1099-MISC reporting. View the IRS page on 1099s for additional information, and work with your tax advisor to determine how the new Form 1099-K impacts your business’s 2011 tax situation.


Chris Hesse, Tax Partner
chris.hesse@cliftonlarsonallen.com or 612-397-3071

Don Frank, Partner-in-Charge of Outsourcing
don.frank@cliftonlarsonallen.com or 612-376-4676