FORM 1099 INFORMATION RETURNS

The specialized nature of an auto body shop dictates that many of the services needed to restore a vehicle are performed outside the shop. Per IRC section 6041, those who operate a trade or business and make payments of rent, salaries, wages, and other compensations of $600 or more for a calendar year are required to file information returns to report such payments.

Generally, per Treas. Reg. section 1.6041-3, payments of $600 or more to a corporation are usually excluded from Form 1099 reporting. If a question arises as to the operating form of the payee, various sources may be consulted. The invoices or cancelled checks paid to the entity may provide a clue. Correspondence is also another source. If it is determined that rent is required to be reported, the lease may provide the operating form. If none of the above sources provides the operating form, it is the taxpayer's burden of proof to show that a Form 1099 statement was not required to be filed.

The examiner must be aware of the potential of the information return test work because it can often lead to significant tax dollars which the primary return (corporate, partnership, or individual) may not produce. Large adjustments can be produced through back-up withholding, return penalties, and even on the returns of the payees who were required to report the compensation but did not receive information returns.

Many services provided to the auto body shop require the filing of a Form 1099 statement. A few are shown below but the listing should not be considered exhaustive. An examiner should always consider whether an information return is required on a case by case basis.

1. Towing Fees: An auto boy shop utilize several towing companies during the course of a year. These towing fees often exceed the $600 minimum.

2. Detailing Costs: Body Shops will often take the completed vehicles to get washed and waxed.

3. Pin Striping: This is a specialized paint service which is often performed by separate entities.

10-1

Back Continue

Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Glossary