Tax-Saving Tips - December 2019
Does No 1099 Mean No Deduction for You? Imagine this: you didn’t issue Form 1099s to your contractors. Now, the IRS is auditing your tax return, and the auditor claims you lose your deductions because you didn’t issue the Form 1099s. Is this correct? No. IRS auditors often make this claim, but they are incorrect. There is no provision in the federal tax law that denies you a deduction for labor expenses simply because you didn’t file the required Form 1099s. But the tax court has stated that the non-filing of required Form 1099s can cast doubt on the legitimacy of the deduction claimed. As with any deduction claimed on the tax return, you have to keep sufficient records to substantiate the deduction amount. If you had filed Form 1099s, then this would have been solid documentation to help prove the expenses to the auditor. But since you didn’t file Form 1099s, you need to provide ironclad documentation to prove the expenses, including some or all of the followin