It’s the 1099 season—and for many business owners, it’s the most dangerous time of the year. In this eye-opening episode, Tax Rep Network Founder Eric Green sits down with his own bookkeeper, Maya from Solvency Now, to break down what most business owners don’t understand about 1099s—and how those mistakes quietly turn into audits, massive penalties, backup withholding, and even criminal exposure. Eric also shares real-world war stories—from restaurant audits to whistleblower cases—showing how small bookkeeping shortcuts can snowball into business-ending consequences.
If you’re a business owner, bookkeeper, CPA, EA, or attorney—or if you’ve ever paid someone “just this once” without paperwork—this episode could save you tens of thousands of dollars and years of stress.
Want to connect with Maya? Email her at maya@solvencynow.com.
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1099 Season Nightmares With Maya Weinreb
The Paperwork Mistake That Can Trigger Audits, Penalties, And Criminal Risk
Joining us again is Maya, who, by the way, is my accountant, my bookkeeper, from Solvency Now. Maya, it’s 1099 season.
It is 1099 season. As a bookkeeper, it’s January, I’ve got 1099s on the brain.
This comes up a lot during audits. It comes up in criminal investigations. It’s another flag for the government. People who just fail to file and/or non-filers that come in now. I have a number of cases where Don Brolin’s the forensic accountant and we’re now dealing with, they paid cash or check, never reported it, 1099s. What are we doing? If you don’t mind, what are people supposed to do? Forget about the non-filers and all that. What is the actual rule with this?
1099 Season: What Business Owners Get Wrong (and Why It Can Get Expensive)
Every year, the same question comes up: Who actually needs a 1099?
Most business owners assume it only applies to “contractors,” but the rule is far broader—and misunderstanding it can trigger penalties, audits, and even backup withholding.
The Basic 1099 Rule (and the Exceptions)
If you paid $600 or more to anyone who is not on your payroll and not a corporation, you generally need to issue a 1099. That includes people many business owners forget about: landscapers, marketing consultants, window washers, IT support, and other service providers paid through the business.
There are a few key exceptions. If you paid someone by credit card or certain third-party processors, the processor issues the 1099—not you. Also, C-corporations and LLCs taxed as S-corps are typically exempt, but you won’t know that unless you collect a Form W-9.
Why the W-9 Is Non-Negotiable
The single best habit a business owner can adopt is simple:
No W-9, no payment.
Before you cut a check or send an ACH, get the W-9. That form tells you whether a 1099 is required and gives you the tax ID you need. If a contractor refuses—or submits a W-9 without a tax ID—you may be required to withhold 24% backup withholding and remit it to the IRS. That money is not yours to spend.
Many accounting platforms now automate W-9 requests, but automation doesn’t solve the problem if you ignore missing information. The responsibility still sits with the business owner.
Deadlines, Penalties, and Backup Withholding
The federal deadline to file 1099s is January 31 (or the next business day if it falls on a weekend). While many people assume “late is fatal,” the real danger is not filing at all.
Penalties range from $60 to $630 per 1099, depending on how late the filing is and whether the IRS believes you intentionally disregarded the rules. Small businesses may get some leniency, but larger operations are increasingly hit with six-figure penalties for repeated noncompliance.
Worse than penalties is backup withholding. In an audit, if the IRS determines you should have withheld 24% on payments made over multiple years, they can assess that tax against you, even though the money went to someone else.
Cash Payments and Audit Triggers
Paying people in cash without issuing 1099s is one of the fastest ways to invite scrutiny. Once auditors start asking for copies of 1099s, missing forms often lead directly to broader questions:
Where did the cash come from?
Was income fully reported?
Were employment taxes avoided?
At that point, exposure expands beyond income tax into payroll tax, sales tax, labor law violations, and potentially fraud penalties.
The Reality Check for Business Owners
Some industries quietly rely on off-the-books labor to stay afloat. That doesn’t make it legal—and it doesn’t make the business viable. If your margins only work when rules are ignored, the risk belongs to you, not the IRS.
The good news? Compliance isn’t expensive. You can file a 1099 for just a few dollars, and proper bookkeeping dramatically reduces audit risk. Even if you missed the January deadline, filing late is almost always better than not filing at all.
Bottom line: 1099s aren’t “just paperwork.” They’re how the IRS tracks money—and how you protect your business from penalties, withholding nightmares, and audits that never needed to happen.
Important Links
About Maya Weinreb
Solvency Now’s founder, Maya, was born in Tel Aviv, Israel (which means she’s Jewish and you know how they say all Jews are good with money). She went to primary school in a little town south of London called East Grinstead. She then moved to Florida when she was 10 and at the age of 11 she told her teacher she would never need math (Ha!) Her teacher disagreed and look at her now. She even knows algebra!
Maya thinks bookkeeping is relaxing (do you agree or do you think she’s crazy?) and challenging. She believes every late night meeting should include popcorn.
She enjoys puppies, motorcycle rides and long walks on the beach. Her favorite meal is brunch, and nobody does brunch better than the restaurants in Tel Aviv. The way to her heart is Italian hot chocolate! She’ll never get over her favorite cup of hot chocolate from a cafe in Milan.
