Avoid penalties by keeping accurate information return records
Did you file all required information returns for 2015 and earlier years? Information returns include Forms 1099, the forms you complete when you pay for certain business expenses such as rent or services performed by an independent contractor. August is a good time to review your filing compliance because this is the time of year the IRS typically begins sending notices for prior year information returns with missing and incorrect taxpayer identification numbers and the penalties for errors continue to rise.
If you get a notice, you may be able to get penalties waived by proving you acted in a responsible manner before and after the error. One way to do this is to document your request for a taxpayer identification number from the vendor or other payee. You may also need to begin withholding income tax known as backup withholding from payments. Contact us for more information.