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Taxpayers who have business income (1099 Filing Rules)

The 2012 income tax forms contain two new questions:

·Did you make any payments in 2012 that would require you to file Form(s) 1099?

·If "Yes," did you or will you file all required Forms 1099?

There are significant consequences for failing to answer these questions, or for answering them incorrectly.

Generally, if you are a business and you pay an unincorporated entity (e.g. individual, partnership, LLC) $600 or more during 2012 for services or rent, you are required to issue a 1099 to that entity. Included in the list of required recipients are payments made to corporations for attorneys’ fees, and amounts paid to corporations providing medical or health care services.

The penalty for not filing a required 1099 with the IRS is $100 per 1099. There is also a $100 penalty for each 1099 not provided to the recipient. If it is determined that a taxpayer willfully neglected to file 1099s, the penalty is $250 per 1099 not filed with the IRS and another $250 per 1099 penalty for not providing a copy to recipients.

Given this new disclosure requirement, we recommend that you review your vendors paid in 2012, determine who may or should receive a 1099, and verify that you have the entity's proper name, address and federal ID number. A Form W-9 can be requested from the entity that verifies information needed to complete your 1099s.

Forms 1099 need to be sent to the recipient by January 31, 2013, and to the IRS by February 29, 2013. The forms are rather straightforward to prepare and file. I can help you if you wish—just let me know.