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Originally Posted by Exhibitman
Correct. Every so often I get a discrepancy notice from the IRS, typically when a big case settled during the tax year and the settlement proceeds go through my client trust account. Regardless of whether I actually keep any of the proceeds, the insurer will 1099 me for the full amount. Usually clears up with a letter. One of the dumber aspects of this 1099 stuff is that lawyers get them for everything (box 14 on the form) but it is not necessary to send them to other businesses if the business is incorporated. So I don't 1099 AT&T, for example.
If you are going to claim to be a card selling business, be business-like. I have a resale permit and eBay store, I remit sales and use tax, maintain correct records of costs, file a Schedule C, etc.
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Lawyers have special issues when it comes to payments going into their IOLTA accounts on behalf of clients. Had just helped a client in filing their 1099s for last year and had to explain how you often have to prepare two 1099s for payments to settle claims, one reporting 100% of the a settlement amount to the recipient, and a second showing the actual portion going to the attorney involved for their share. Or you may have to do Nominee statements to break up a 1099 that goes to one person but, needs to get broken up amongst several people. The trick is to make sure you report everything as it goes to the IRS so they don't come back at you for later on.