Form 1099 Misc./NEC Engagement Letter

The IRS requires that business owners file a Form 1099-Misc/1099 NEC in most cases by January 31, 2024 for every individual or non-corporate LLC that you paid over $600 in 2023 for trade or business services. If you pay a lawyer corporation for trade or business service they must also receive the form. Failure to file the form could result in a penalty that could be as much as $1,000 per each omitted, late or incorrect 1099-Misc. The 1099-Misc /1099 NEC must be provided to the taxpayer by January 31, 2024 and this year the IRS’ copy must also be provided by January 31, 2024 or those penalties will apply. 

The problem you may encounter is those sub-contractors that don’t want you to issue them one, so make sure you get them to fill out a W-9 form before you issue them a payment.

1. This letter confirms the services provided by Alpha Omega Tax Service LLC (AOTS) and the terms under which we have agreed to do that work. Please read this letter carefully because it is important that you understand what you can and cannot expect from our work. If you are confused at all by this letter or believe we have misunderstood what you need, please call us before you sign it.
2. This engagement letter represents the entire agreement regarding the services described herein and supersedes all prior negotiations, agreements, written or oral, regarding these services. The Internal Revenue Service imposes penalties on taxpayers, and on us as return preparers, for failure in reporting for income tax returns. In order to ensure an understanding of our mutual responsibilities, we ask all clients for whom we prepare tax returns to confirm the following arrangements. We will prepare the returns from information which you will furnish to us. It is your responsibility to provide all the information required for the preparation of complete and accurate returns. We will furnish you with any questionnaires and/or worksheets that you request to guide you in gathering the necessary information. Your use of such forms will assist us in keeping our fee to a minimum. To the extent we render any accounting and/or bookkeeping assistance, it will be limited to those tasks we deem necessary for preparation of the returns
3. AOTS will prepare your Federal Form 1099-Misc and 1099-NEC soley from information you furnish us. We will not audit, review, compile or otherwise verify the data you submit although we may ask you to clarify some of the information. We are not responsible for the preparation of any forms or schedules except Forms 1099-MISC/1099 NEC for the individuals for whom you provide us a written summary in a separate format as listed below. If you have forms or payees other than those specifically listed, we will not be preparing those forms unless specifically requested by you, in writing in a separate engagement letter, to prepare those forms. Any other required services, forms or other actions on our part require a separate engagement letter. In the absence of written communications from us documenting such services, our services will be limited to and governed by the terms of this engagement letter.
4. In order to timely file your Forms 1099-Misc/1099 NEC in agreement with this letter you must provide us, IN WRITING, a complete list of payees by January 18, 2024 as follows, for each payee:
            A. Payee Name and Full Mailing Address
            B. Payee Federal ID Number (obtained by you on Form W-9)
            C. Amount paid during 2023 for non-employee compensation
            D. Amount paid in 2023 for Rent
5. If you are in doubt whether to issue a 1099, the safest treatment is to issue the form.
6. It is your responsibility to maintain the records, forms, documentation, Forms W-9 and copies necessary to file the Forms 1099-Misc/1099 NEC.
7. It is our policy to keep records related to this engagement for three years after which they are destroyed. When records are returned to you, it is your responsibility to retain and protect your records for three years for possible future use, including potential examination by any government or regulatory agencies.
8. You agree to the fullest extent permitted by law, to limit the liability of AOTS for any and all claims, losses, costs, and damages of any nature whatsoever, so that the total aggregate liability of AOTS to the client shall not exceed ½ the total fee for services rendered under this agreement. The client and the AOTS intend and agree that this limitation apply to any and all liability or cause of action against AOTS, however alleged or arising, unless otherwise prohibited by law. Both parties agree that there is a one-year limitation period, beginning on the date of this agreement, to bring a claim against us for errors and omissions.