Monday, February 22, 2010

Start Up and Beginning Business Topic: California Ups the Price of Not Issuing 1099s

clip_image002[1]This article was written by Dick Ginatty, CPA

Businesses that utilize independent contractors who provide services in excess of $600 per year are required (and have been) to issue form 1099 by January 31st of the next year. There has always been a penalty for non compliance but California recently substantially increased the penalty for non compliance.

The Franchise Tax Board may disallow a deduction for amounts not reported on a 1099. This may result in large dollars of legitimate deductions being taken away. Prior to this the deduction was still granted but you had to pay a fine.

Thank God, it is not too late for 2009. As stated above the due date for the 1099s is January 31st but the transmittal form (Form 1096) to the federal government is not due until the end of February. Therefore, there is still time to review your reporting in this area and make up any deficiencies. Penalties for non compliance are assessed by the Federal government and are based on the amount of time that has passed since the due date. After August, the penalty rate is $50.00 per 1099.

By the way QuickBooks can print both the 1099 and the transmittal form (1096) for you.

Good luck and here’s hoping it “all adds up” for you.

If there is any area in accounting or tax that you think needs to be addressed in this column please e-mail me at and if it is of general interest, I will address it in future columns.