Tax Insights

Your Guide to State, Local, Federal, Estate + International Taxation

More than just bad math – Are you filing 1099s correctly?

We hear about the unimpressive US ranking in math compared to other countries. But this study shows it goes a lot farther than that. A recent report from The United States Treasury Inspector General for Tax Administration (TIGTA) says there are billions of dollars in non-payroll withholding discrepancies that were found in a study of IRS Form 1099s and 945s by filers for the tax year 2016. While most of us are familiar with Form 1099, Form 945 is used to report to IRS the withheld federal income tax from nonpayroll payments such as distributions from qualified retirement plans or gambling winnings that are shown on the 1099s.

Learn more about 1099s

The study found that 7,265 payers provided Forms 1099 or W-2G (gambling winnings) to IRS reporting $923 million of withholding but did not file Form 945. 3,163 payers reported on Form 945 $760 million LESS in withholding than what they reported on Forms 1099s and W-2Gs. Just forgot to file or math errors perhaps? Likely more than that given the large discrepancies are so unbalanced to the government’s detriment.  Though there was a finding of some 945s that were filed but the associated 1099s or W-2Gs were not.

While TIGTA recommendations were not disclosed, IRS management does plan to identify compliance activities that will address the noncompliance found in the study. Such measures could include notices for payment, requests for missing forms, or audits of businesses. This in addition to better computer matching of data files that is apparently lacking currently with these forms.

If you’re a business that has filing requirements of Forms 945 and related 1099s, now is the time to make sure you are being complete and accurate in your filings and payments. And as I have to remind my son in high school periodically, let’s get that math grade up. But if you need more than math help, contact your Henry+Horne tax professional.


Dale F. Jensen, CPA