Hi. I’m Tim Mayclin, CPA from Rohnert Park, California. Today we’re going to talk about 1099’s. If you’re a small business you have to file 1099’s by January 31, 2014. Anybody that you paid for services over $600 in the calendar year of 2013, you have to report that to the IRS on a 1099 form. If you don’t, the penalties are $30 to $100 per 1099 that you should have filed and if they determine that you didn’t file intentionally they can charge you an additional $250 per form.
Some states are different. In California, if you don’t file a 1099, they disallow the deduction completely. That means if California disallows a $10,000 deduction it increases your income by $10,000, if you’re in the 10% bracket for California, which isn’t that uncommon. You have to pay an additional $1,000 in tax plus penalties and interest. That can be pretty expensive. It is important to file those 1099s. If you need help, contact your local CPA.