published December, 2011
The IRS is trying to close the “Tax Gap” by clamping down on 1099 reporting.
If you have paid more than $600 for services to a business context, you need to know details about your provider so you can issue 1099s. There are some exceptions to the requirement to issue the 1099s, but you need the details of the vendor to qualify. You can collect the information with a Form W-9, available at www.irs.gov. The exception for 1099s are for services provided by corporations…and the exception to the exceptions are services provided by lawyers and certain medical payments. This means lawyers DO get 1099s, even if they are incorporated.
The IRS is asking about 1099s specifically on Schedules C and E. They are also touting a case from 2009 where the IRS successfully disallowed expenses for a contractor who failed to prepare 1099s. There is also a new form—the 1099-K or what I call the “EBay form”—PayPal and other third party payment processors will issue reports to the IRS (and you) if you’ve received payments from them during the year, and they’ll list payments by month. The 1099-K is still in the preliminary stages, but if you haven’t been reporting payments via PayPal, you’ll now have to explain this.