Just wanting feedback on how others would suggest handling this or how they are suggesting clients handle this.
On the various business forms this year - including Schedule F and C for Form 1040 (and 1120, etc.) - there are the new questions I and J (references from Form 1040 Schedule C) asking if you made any payments in 2011 that would require you to file Form(s) 1099 and if yes, did you, or will you file all required forms 1099?
Client has a schedule C with approximately $1500 +/- rent expense paid. Client did not file 1099 for 2011 and did not file one in previous years. Just obtained client's information in the past few days. Of course, the deadline for filing forms 1099 to IRS has passed.
Anyone have any thoughts for how to handle this situation? I know the proper answer is to answer 'YES' to both questions .... but, should I advise the client to prepare and file the appropriate 1099s NOW and go ahead and file them and try to seek 'forgiveness' if a penalty is assessed?
As a 'little guy' (or 'gal' - just doesn't sound the same though LOL) out here doing tax returns, I would like to thank everyone in this newsgroup for sharing all of their wisdom!
If 1099 forms should have been issued, then issue them. I have not seen the IRS send a penalty on late filed 1099's in the past unless they were really-really late, or the taxpayer was told to issue 1099's in a prior exam and still refused. Sometimes despite the best of intentions and accounting records, which all our clients keep, you catch the need to issue a 1099 for someone in March or April....or May or June.... and I doubt the Service wants to penalize someone to the extent that they may not do the right thing and issue to avoid said penalty.
Oh, and I don't mark "yes" and "yes" if I know that 1099's didn't need to be issued and therefore were not issued.
Unknown. This is the first year these questions have been asked. In theory, the IRS could assess various penalties for non/late filing.
form online, fill it out, and mail it, right?
Complicated is in the eye of the beholder. You can't just download the form because the filing copy is printed in red ink. However, you can purchase blank forms at any office supply store. Many tax preparation software programs (including certain versions of each consumer grade tax prep program) can produce a black-ink version that meets IRS approval. Entering the data on the forms is trivial.
I belong to two real estate investor associations in my area and this question has come up recently regarding rental properties and the two new questions about 1099's. For me, the issue was important because I (like your client) neglected to issue 1099's in the past and didn't issue any for
2011. And, now I am suddenly confronted by those two questions (on a Schedule E, I think) that specifically ask me whether I was supposed to issue 1099's and, if so, did I or do I plan to issue them. If I knew back at the beginning of 2011 that those questions were going to be asked, I probably would have paid more attention to getting the required information from contractors and issuing 1099's for 2011.
There was a panel discussion at one of our real estate investor meetings and one CPA was on the panel and another participated from the audience. Both CPA's have a lot of clients who are real estate investors with rental properties. The consensus from the CPA's was that, in general, 1099 for rental property expenses are not required.
And, here is what one person (not a CPA or accountant) wrote in an online discussion forum among the real estate investor group:
"Because Congress and the IRS went back-and-forth on the issue in 2010 and
2011, confusion exists among landlords concerning the need to issue
1099-MISCs to those who provided goods or services claimed as expenses against real estate rental income. One source of difficulty is that the 2011
1099-MISC form and instructions are IN ERROR regarding the issue because they were printed before the original requirements were repealed.
The following characterization of the final law was provided by three IRS policy officials having the title, "Senior Stakeholder Liaison, IRS Small Business/Self Employed Division" to a meeting of the Association of Government Accountants in Philadelphia on February 15. In summary:
Despite what it says on the 2011 form 1099-MISC, If your rental income was "passive," you do NOT have to issue 1099s EITHER TO CORPORATIONS OR TO INDIVIDUALS for expenses incurred against that income. Rental activities are passive activities even if you materially participated in them, unless you qualified as a real estate professional, in which case they are not passive. You qualify as a real estate professional if you met both of the following requirements:
1) More than half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated.
2) You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated."
THANKS for all of the input - When I referred to the 'proper answer is to answer 'YES' to both questions ...' .... I was referring to the specific situation I am dealing with - I was not suggesting that the questions be answered blindly as YES and YES if no 1099s were required. In the situation I refer to, there are 1099s that need to be issued, so the proper answer to both questions should be YES. I will get them prepared and issued. Thanks for the feedback!!
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