So I didn't issue a 1099 to a contractor. He didn't break down the labor and materials for me. The amount is $705. Turbotax asked me if I failed to send out. I answer yes. I am wondering how this is handled. Will the IRS be notified of my mistake to trigger a possible audit or am I just penalized a $100 or what? I believe I can still claim it. In my research I find that it is commonly thought that I can't deduct it and this is not true as nothing stated in Section 162 or Cohan requires a Form 1099 to be issued for a subcontractor labor expense to be deducted. I just have to prove the expense if audited.
