No 1099, No Deduction?

Careful! If you didn’t issue 1099s to your contractors, you could face some nasty penalties.

You see, if the IRS audits your tax return, your friendly auditor may claim that you can’t deduct the contractor payments because you didn’t issue those 1099s. Ouch!

And then to add salt to the wound, the IRS will impose substantial penalties for failing to file those 1099s.

Actually, there is no ouch because auditors often don’t understand the law and get things wrong.

Want to stay out of trouble in the first place and avoid penalties (and anxiety)? Read my new article titled Q&A: No 1099, No Deduction?

Three ways our fact-filled article can help you:

1. We’ll explain the rules that auditors don’t understand. The compensation for services that contractors provide to your business is a deductible business expense (provided that your expenses are ordinary and necessary and reasonable in amount). There is simply no provision in the tax law that denies you a deduction for labor expenses just because you didn’t file the required Form 1099s. You’ll get the whole story when you read the full article.
2. You’ll learn why proof of payment is so tremendously important. Since you didn’t file Form 1099s, you’ll need to provide uncontestable, ironclad documentation that proves the expenses were legit. This includes some or all of six types of proof. We’ll list them for you when you read the full article.
3. We’ll tell you what you can do to avoid 1099s altogether. It’s true, you can make credit card and PayPal payments to your independent contractors and those payments are not subject to the 1099 reporting requirements. And there are two other types of payments that fall into the non-1099 rule, too. What are they? You’ll find out when you read the full article.