Amidst unprecedented changes involving 1099/1042-S reporting and a dramatic increase in associated due diligence requirements under the law the IRS is about to get a massive enforcement boost. On April 27, 2021 it was announced that the current Administration is seeking a staggering $80 billion increase in the IRS enforcement budget.

Closing the tax gap (the difference between what the Federal government takes in and the actual amount of tax revenue it is owed) has been an ongoing IRS project for decades. Now it appears this may actually become reality. To put that $80 billion in perspective it represents an increase of two-thirds over the agency’s entire funding levels for the past decade.

A core target of these enforcement efforts will be on mid to large sized organizations just like the one where you might be working in accounts payable or tax. You can expect increased audits surrounding your organization's corresponding 1099 reporting and compliance procedures. Making this enhanced enforcement effort even more effective will be the fact that audits are planned to be only a part of the push.

A significant new weapon being added to the IRS arsenal is the ability to better leverage technology to better target those organization's failing to properly 1099 report payments made to vendors and contractors. To that end, and in a recent New York Times article about these tax changes, Fred T. Goldberg Jr., a former I.R.S. commissioner, emphasizes how much “Information reporting, coupled with restoring enforcement efforts, is the key to improving compliance." 

You have been warned. Make sure you use the late spring/early summer slow-down in the 1099 season to get your policies and procedures in order. In addition, stay on top of the continued blizzard of changes being made to your 1099 requirements (for instance we just had the March 2021 changes made to Forms 1099-NEC and 1099-MISC). Finally, know that we stand ready to help through either our 1099 question and answer subscription service, 1099 tax guides, monthly 1099 webinars, or customized programs available to best meet your Accounts Payable needs.