TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, February 28, 2009

GAO: Make Payments to Corporations Subject to Form 1099-MISC Reporting Requirement

The General Accountability Office has released Tax Gap: IRS Could Do More to Promote Compliance by Third Parties with Miscellaneous Income Reporting Requirements:

The IRS does not know to what extent payers fail to submit required 1099-MISCs, but various sources point to the possibility of a significant problem. For tax year 2005, 8 percent of the approximately 50 million small businesses with assets under $10 million submitted 1099-MISCs, but IRS does not know how many of the other 92 percent were required to report payments but did not. Many business payments, such as payments to corporations, are not subject to 1099-MISC reporting. If even a small share of the businesses that did not submit a 1099-MISC should have, millions of 1099- MISCs could be missing with significant amounts of unpaid taxes by payees. GAO’s prior work in 2003 found significant 1099-MISC payer noncompliance by some federal agencies. IRS could mitigate costs for research on payer noncompliance by building on its existing research programs. ...

Congress should consider requiring payers to report payments to corporations on the Form 1099- MISC.

Senate Finance Committee Chair Max Baucus applauded the report.

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