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W-2 and 1099 filing requirements

If you have clients that pay wages and compensation to employees and independent contractors, make sure they file Forms W-2 and 1099.1, 2, 3 As part of our audit process, we review Forms W-2 and 1099 to support business expense deductions. We may disallow business expense deductions for these types of payments, and may impose penalties of $50 for each form that is not filed.1, 2, 4, 5 Proper filings must also support other business expense deductions like rent, profits, and income payments, among others.1, 2

This audit strategy is part of our ongoing tax gap effort to ensure that business expense deductions are appropriately supported, and that employees and independent contractors report all income received during the year. As a tax professional, you can play a vital role in this effort by making sure your clients file the proper documents.

For more information, refer to FTB Publication 4227A, Guide to Information Returns Filed With California. Find more information and reporting requirements for Forms 1098, 1099, 5498, and W2-G on our Website at www.ftb.ca.gov (search for "information reporting"), and in FTB Publication 8305,6 Reporting Requirements for Forms 1098, 1099, 5409, and W-2G.

  1. California Unemployment Insurance Code Section 13050 and California Revenue & Taxation Code (CR&TC) Section 18631 (replaced Section 18637 and Section 18638).
  2. Internal Revenue Code (IRC) Section 6041 and Section 6041A.
  3. CR&TC Section 18402.
  4. CR&TC Section 19183 and IRC Section 6721 and Section 6722.
  5. CR&TC Section 17299.8 and Section 24447.
  6. This publication is obsolete as of 02/26/2009. The content that replaces it is pending.