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1099-Misc / 1099-NEC

Posted 11/8/2019

Businesses usually ask "Do I have to issue those 1099s?"  Let me provide the warning and from this point I am tired of discussing 1099 reporting. 

A little history:

2011 - IRS added to business income tax returns the questions regarding requirement to issue 1099 and subsequent compliance.  This falls under the penalty of perjury statement of the tax return and under the tax accountants due diligence responsibilities.  What does that mean?  Taxpayers can be charged for perjury and the accountant can be banned from practice for noncompliance..

2016 - IRS greatly increased fines for non-compliance with 1099 information reporting and moved up the due date up for the Non-Employee Compensation portion.

2019 - Earlier this year IRS announced that they will bring back the 1099-NEC for Non-Employee Compensation in 2020, thus moving the Non-Employee Compensation off the 1099-MISC and back to its own form, as it was in 1982.  Why are they doing this?  The answer is that they are having difficulty in separating 1099-Misc for Non-Employee Compensation from other items on the 1099 that have different due dates.  The separation will provide an easier path to assess penalties for late filing these documents. 

Clearly the IRS is concerned about 1099 Forms.  The new 1099-NEC for 2020 will first be issue in 2021, five years after penalty increase and 10 years after setting the compliance trap.  Clearly a 10 year plan in place to go after noncompliance.  Our advice is to file all information returns that are required by their respective due dates.  For this office, we want all 1099/W-2 work done before February 1st.  By this time, we are into income tax season.   

Think about this, IF the "check the box" on the tax return is marked "compliant" they can cross check to see if they really were issued.  No cross match, then someone is in trouble.  IF the "check the box" marked not compliant, could be an automatic audit.  The issuance of late 1099-NEC will be automatic penalty.  You have been warned, it can not be any more clear.