February 13, 2012

2011 Business Income Tax Returns and Form 1099 Information Reporting

For 2011 business tax returns (Forms 1065, 1120S, 1120, and 1040 (Schedules C and E)), the IRS has added a new question regarding certain information reporting.  Specifically, the question asks whether the taxpayer has made any payments during 2011 that would require it to file a Form 1099, and if yes, whether the taxpayer has filed or will file all required Forms 1099.  While the requirement to file the Form 1099-MISC is not new, this question is new, and is part of the IRS’s efforts to gain more insight into possible under-reporting of income by service providers.

There has been no change in the filing requirements; we are sending this alert out to highlight the IRS’s increased scrutiny of this requirement. This is a reminder that payments made of $600 or more during the taxable year made in the course of a taxpayer’s trade or business to most service providers not operating in a corporate form are required to be reported on Form 1099-MISC.

The due dates for filing a Form 1099-MISC are as follows:

• Copy to payee/recipient – January 31, 2012
• Copy to IRS – February 28, 2012

The penalty for not filing a required Form 1099-MISC is $100 per unfiled form.  However, if the taxpayer files within 30 days of the due date, the penalty is reduced to $30 for late Forms 1099-MISC.

We strongly advise you to file all required 1099 forms because if your return indicates a “no” answer, such response could trigger an IRS audit of your information reporting function.

Please contact your ParenteBeard tax advisor as soon as possible to discuss this matter.