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Forgot to issue 1099's? New York

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  • Forgot to issue 1099's? New York

    We are a corporation and are filing our tax returns for 2011 which was our first year in business. We had about 5 to 7 independent contractors but at the end of the year we forgot to issue them with a 1099. Doesn’t anyone know what we can do in a situation like this as I was told there may be penalties and fines. What should we do with regard to our 2011 filing?

    Thanks

  • #2
    This is going to be a careful answer.
    - Not filing a 1099 when due is not a huge deal. It is something like a $50 fine per instance. Worth avoiding but not a game changer.
    - Not having the related valid W-9 on file is a big deal. Absent the valid W-9, there was a withholding requirement not meet. Something like 28% on the federal side. If IRS wants to get hardball on this, and they often do, they can fine the withholding not taken, plus interest and penalties on the withholding not taken. Since having a valid W-9 on file completely removes the withholding requirement (and related fines), smart employers NEVER make a payment to ANYONE who might possibly be considered subject to the withholding rule without first getting a valid W-9 on file. I have worked for very large publically traded companies who had to issue hundreds of W-9s each year to customers who know darn well we were a corporation that everyone had heard of, and who none the less wanted W-9s on file so IRS would go away quickly if audited. I worked for one employer where the person I replaced was fired because of one of these audits and the brass said, never again (or else). So we got W-9s from pretty much everyone. We even had one from IRS.
    - Last gotcha. You are saying that you have income payments to a number of persons that you consider to be independant contractors. Will IRS agree with you? This is a function of statutory law, not the opinion of the people who wrote the checks, and if IRS feels that these workers are legally employees, no amount of 1099s will prevent the resulting [bleep] from hitting the fan.

    Not having issued a 1099 per se is not nothing, but not a very big deal., but not having valid W-9s are failing to follow the statutory worker classifications can be a huge deal. Be clear on just what is the tail on what is the dog here.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)

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