• Did you make any payments in 2011 that would require you to file Form 1099s?
• If yes, did you file all Form 1099s?

In general, you must file a Form 1099-MISC if you paid an individual or business (other than a corporation) for rents, services, and/or compensation to a non-employee in excess of $600 in any calendar year. Generally, if the entity's name includes "Inc." or is incorporated, you do not need to issue a Form 1099. LLCs and partnerships do not fall under this exception. Boeckermann Grafstrom & Mayer LLC is not a corporation and you may be required to issue a Form 1099 for the fees paid to us during the calendar year. Some LLCs can elect to be taxed as a corporation which will be indicated on the signed Form W-9 and will not require filing a Form 1099.

Those who make real estate available for rental are not considered engaged in a trade or business so long as the average rental period is at least 30 days.  Because IRC § 6041 only imposes a reporting requirement when payments are made in the course of a trade or business, landlords generally have not been required to provide Form 1099s for payments made for expenses for their rental real estate properties.

The penalties for not issuing a Form 1099 or not obtaining a Form W-9 may be significant. If you are given a wrong social security number/employer identification number or someone fails to give it to you, you may be required to withhold 28% (backup withholding) of all payments after the first $600.00 was paid during the year. You could be liable for the withholding even if you did not withhold it.

The penalty for not filing or filing an incorrect Form 1099 is as follows:

• $30.00 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small business).
• $60.00 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for small business).
• $100.00 per information return if you file after August 1 or you do not file required information returns; maximum penalty $1,500,000 per year ($500,000 for small business).

For your convenience, we have included a link below to access a Form W-9 for Boeckermann Grafstrom & Mayer, LLC. Form 1099-MISC is required to be distributed to recipients by January 31, 2012 and filed with the IRS by February 28, 2012. If you need assistance in issuing Form 1099s, please contact us to ensure timely filing.

Very truly yours,