Oh crud, I didn’t issue a 1099!

Imagine this: you didn’t issue Form 1099s to your contractors.

Now, the IRS is auditing your tax return, and the auditor claims you lose your deductions because you didn’t issue the Form 1099s. Is this correct?

No. IRS auditors often make this claim, but they are incorrect.

There is no provision in the tax law that denies you a deduction for labor expenses simply because you didn’t file the required Form 1099s.

But the tax court has stated that the non-filing of required Form 1099s can cast doubt on the legitimacy of the deduction claimed.

As with any deduction claimed on the tax return, you have to keep sufficient records to substantiate the deduction amount. If you had filed Form 1099s, then this would have been solid documentation to help prove the expenses to the auditor.

But since you didn’t file Form 1099s, you need to provide ironclad documentation to prove the expenses, including some or all of the following:

• Bank statement transactions
• Canceled checks
• Credit card statement transactions
• Invoices from the contractor
• Signed agreements with the contractor
• A signed statement from the contractor verifying the amounts received

Ultimately, to prove your deduction in a court of law, should you have to go that far, you’ll need to show by a preponderance of the evidence that you made the payments. This means that your evidence has to make it more than 50 percent likely that you did make the payments to the contractors.

Besides the extra trouble of proving the deductions, keep in mind that the cost of not filing Form 1099s surfaces a financial penalty.

The potential penalties start at $270 (at the time of this article being written) and can balloon up to $550 per form 1099 if the IRS determines you intentionally disregarded the requirement.

As you can see, filing the 1099s avoids trouble.

Set a system in place and get your tax problems under control.

The government has a ruthlessly effective system in taking your business profits.

It’s called the tax code and it can easily overwhelm you.

You see, the government has a system to take your money through the tax code.

And most CPA’s and accountants are so busy preparing taxes and helping their client stay compliant with tax law that they simply miss the opportunities that there are to save serious tax dollars.

That is because they are lacking the time and energy to track those tax strategies down and then communicate those to you.

That is where Tax Reduction University fills the gap. The TRU Tax Strategy System is the missing link between remaining captive to the government's system of oppressive taxation and finally declaring freedom from large tax bills forever!