Should you issue a 1099-C if you have a client or customer that doesn’t pay you what they owe you? Bruce the Missouri Tax Guy and Jason Dinesen both address that today. Both posts are worth reading. Jason explains:
So unless your business is in the business of lending money, you aren’t required to issue a 1099-C to a non-paying client.
But are you prohibited from doing so? It doesn’t appear so, at least not under tax law.
What does issuing a 1099-C do? In a couple of years the IRS computers will look for debt forgiveness income on your deadbeat’s tax return and send them a notice when they don’t pay taxes on the services they received from you without paying. Peter Pappas, a Florida tax attorney blogger, says “I have seen many cases where a disgruntled ex-partner or creditor rifled off an erroneous 1099-C just to get the taxpayer audited by the IRS.”
So you get a measure of vengeance. Is it worth it? I think Jason is wise when he says:
Personally, I wouldn’t issue a 1099-C to a deadbeat client. I realize there may be some satisfaction in threatening a deadbeat and seeing them sweat. But I think it would cause more harm than good to go down the 1099-C route.
I agree. Better to bill timely before they owe you too much, and walk away if they don’t pay. Take care of your good customers and don’t waste your time on the deadbeats.
It’s August 15. Aren’t you glad we don’t have to re-extend tax returns any more? A few short years ago, you could only “automatically” extend a 1040 until August 15. You had to file a second extension request to get another 2 months extension, and you had to have a “good reason” for it. If you didn’t give a reason, they would deny your request, so your return would be late.
Every tax pro learned to include a boilerplate statement on the second extension form, something meaningless like “Additional time is needed to gather the information necessary to prepare a complete and accurate return.” It was really a waste of time but a potential trap. Fortunately, the automatic extension is now six months, so August 15 is just another summer day at the office.
Ryan’s Goal: Low Taxes and Small Government, not a Balanced Budget (Howard Gleckman, TaxVox). All three would be nice, but right now two out of three would be a huge improvement.
William McBride asks ”Would Romney Pay Zero Taxes under the Ryan Plan?” at the Tax Policy Blog.
Kay Bell is Comparing Obama, Romney tax plans
Trish McIntire says “Use Your Tax Info for Election Analysis.”
Anthony Nitti, First Strippers, Now Masons. Everyone is an Employee.
It’s Wednesday, so that means Robert D. Flach of
New Jersey Pennsylvania isbuzzing.
So tell me about your last accounting job. From Columbia, S.C., wspa.com reports:
The state Hospitality Association’s former accountant was sentenced Tuesday for stealing $500,000 from her employer.
Rachel Duncan pleaded guilty to federal tax evasion and wire fraud charges in April.
The 42-year-old was sentenced to 30-months behind bars and three years on probation. She was also ordered to repay more than $350,000.
OK, what were your other achievements on the job?
Her plea came 10 weeks after chief executive officer Tom Sponseller was reported missing.
He was found 10 days later in a storage room. He had committed suicide.
Prosecutors said they found sexually-oriented photos of Duncan on Tom Sponseller’s computer. But prosecutors said there is no indication he received any of the $480,000.
OK, Miss. We’ll get back to you…