I have always argued with teachers. Can’t help it, sorry, Mom. A few days ago, at an IRS-sponsored professional seminar, one recognized authority was discussing the hot topic of independent contractors. Then she made a statement that forced me to interrupt her lecture and start a spirited argument. What she said was:
No 1099 means no deduction!
Wrong! – screamed yours truly. Not filing a 1099 is certainly against the rules. True, you can get some unwanted attention from the IRS, and you can be slapped with significant penalties. However, the tax law clearly states that a business can deduct all “ordinary and necessary” business expenses. Nowhere in the law is this right conditioned on compliance with other requirements, such as filing a 1099. I challenged the instructor to defend her statement with a legal citation.
This was when she pulled out that infamous argument that boils my blood every time. But – she said – the IRS auditor will not allow this deduction without 1099s! And you know what? Usually, this will be the case. You know what else? That IRS auditor will be in the wrong! No taxpayer should ever submit to being bullied by an IRS auditor who does not follow (or does not even know) the law. And while I can understand a regular citizen being intimidated by the almighty IRS – such sheepish submissive attitude is totally unacceptable from the tax professional representing your case before the IRS.
What do we say when a defense attorney refuses to argue a point for his client just because the prosecution “would not accept it”? Malpractice, anyone? Yet, in my business, not only such poor representation is common, it is being encouraged and taught at seminars like the one I attended. Sad, indeed.
An interesting little footnote: after the session, I was approached by two ladies who introduced themselves as former IRS agents who now retired and switched sides. They shook my hand and confirmed that, while the IRS auditors are indeed trained to disallow contractors’ labor without 1099, I was absolutely right to fight such arbitrary position as unlawful.
What can I say? If you’re in trouble with the law, find a capable attorney, not a gutless wussy. If you’re in trouble with the IRS, find a capable tax professional. The one who brings to the fight his sparring gloves (see my logo at the top of this page), not his white flag.
Mike, good for you. Glad I’m not the only one who feels this way. I’ve had collection officers try to say that if a personal vehicle is listed on the corporate return it can be seized for corporate taxes, even though it it titled in the individuals name, and was never formally transferred to the corp. IRS bullying never seizes to amaze me!
Joe,
I did not notice your comment as it was flagged spam, sorry. Great to see you stop by my blog. Cheers, colleague! Michael Plaks.
Love it! Will keep this in mind. Thank You
Thank you Joseph! It would be even nicer if the IRS kept it in mind, but alas… Best to you! Michael Plaks
i work for myself as a auto detailer,most of my customers pays me cash and im sure they dont even claim what they pay me because its only 150 dollars or less.by the end of the year i made 11000. and i climed it on my tax without a 1099..now tht i i audit for it what should i do? please help…
If the IRS decided to audit you, it is not because 1099 forms. Most likely, it is because the IRS did not like business expenses that you claimed on your tax return. I cannot give you any advice because I have not seen your tax returns or your IRS letters. If you need help with this issue, please contact my office. Meanwhile, please read this article.
Thank you for asking! Michael Plaks
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