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2. Accuracy Test: a. The total number of statements filed per the
Form 1096 Transmittal should be reconciled to the Form 1099 statements. This
allows the examiner to determine whether any Form 1099 statements are missing. b. If a payment schedule has been provided,
compare the amounts on the schedules for selected individuals against the
amounts on the Form 1099 statements. In some cases, individuals were included
on the schedule but no Form 1099 statement was filed. Follow up by the examiner
revealed that Form 1099 was required. In other cases, the schedule was
mathematically inaccurate. c.
To determine whether
the Form 1099 amounts are correct, select a few individuals and compare the
payment schedules with the cash disbursement journals for the related years. d.
If there are any doubts about the actual
filing of the Forms 1096 and Forms 1099, a Payer Master File on Line (PMFOL)
can be obtained via IDRS. Consult the current ADP and IDRS Information handbook
for information. 3. To test for
nonfiled Form 1099 statements: If the taxpayer has not
filed any Form 1099 statement at all, then the examiner will need to examine
the general ledger and/or disbursement journals for any payments which appear
to be service related. If the general ledger accounts are detailed, then
account descriptions such as "Towing," "Sublet," Legal and
Accounting," "Commissions,"
"Rent," and other service type accounts should be especially
screened. In cases where Form 1099
statements have been filed the examiner should be alert for omitted vendors. In
this case the cash disbursements journal should be scanned with the Form 1099
statements handy. Any vendors paid through service type accounts should be
noted if paid over $600 and a Form 1099 statement not issued. Consistent
omissions of large amounts should be considered for intentional disregard
penalties. 10-3 Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Glossary |