What Happens If You DON'T File a 1099? 🚨

Worried about losing your business deductions for not sending a 1099 to your contractors? While the IRS might question this during an audit, your legitimate business deductions are not automatically disqualified. Let’s break it down. 😉

Will you lose deductions if you don’t file a 1099? 🤔

Nope! Tax law states that any business expense is deductible if it’s:

  • Ordinary: Common in your industry.

  • Necessary: Important for your operation.

  • Reasonable: Reflects the work performed.

Not filing a 1099 doesn’t change these principles. However, it might complicate matters in an audit if you lack proper proof. 📂

How to prove expenses without a 1099? 🛠️

If you didn’t file a 1099, you’ll need to back up the payments with solid evidence. Here are some options:

💳 Bank transactions: Your account records.
📄 Canceled checks: Proof the contractor received payment.
📑 Invoices: Detailed documents of services and amounts.
✍️ Signed contracts: Agreements with clear terms.
🖊️ Signed statements: From the contractor confirming payment.

In court, use the "preponderance of evidence" standard. Show that it’s more likely than not that the payments were made.

Penalties for not filing 1099s? 💸

Even if you don’t lose your deductions, you could face fines:

1️⃣ $330 for each unfiled 1099.
2️⃣ Up to $660 for intentional disregard. 😬

Better safe than sorry!

Exceptions: When a 1099 isn’t required? ✅

Not all payments require a 1099, even if they exceed $600. Examples include:

  • 🏢 Payments to C corporations.

  • 🛡️ LLCs treated as C corporations.

  • 💳 Payments via debit or credit card, CashApp, Venmo, or PayPal.

Always double-check the rules before filing.

Conclusion: Protect your business deductions 🔒

Not filing a 1099 can complicate audits and lead to fines, but your deductions are safe if you have clear records.

If the IRS denies your deductions:

1️⃣ Request a meeting with the auditor’s manager.
2️⃣ Appeal through the IRS Office of Appeals.

👉 Pro tip: Keep detailed records and consult a professional to ensure your business stays compliant. Don’t let fear of an audit hold you back! 🚀

Jose Garcia