Instructional Information for filing Form 1099-MISC

If you are a small business owner and made payments to independent contractors, it is likely that this post will be applicable to you, and what you need to do to protect yourself and your business from penalties.

Before we begin, what is a “Form 1099-MISC”?

A Form 1099-MISC is used to report payments for services made by your business typically to your independent contractors. You will be required to file the form if those payments total $600 or more for the tax year for any individual. Typical payments include rents (Box1), royalties (Box 2), and compensation to independent contractors (Box 7), such as consultants, web designers, accountants, lawyers, and cleaning services.

What if you don’t file? Penalties.

Missing an IRS deadline is worrisome at best and financially crippling at worse.

Here are the penalties the IRS will be assessing on each form you do not file timely:

  • $50 per information return if you correctly file within 30 days; maximum penalty $536,000 per year ($187,500 for small businesses).

  • $100 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $1,609,000 per year ($536,000 for small businesses).

  • $260 per information return if you file after August 1 or you do not file required information returns; maximum penalty $3,218,500 per year ($1,072,500 for small businesses).

If failure to file was intentional, the minimum penalty is $530 per information return with no maximum to the total penalty

What are the filing deadlines?

If you're filing Form 1099-Misc and have amounts to report in Box 7: Non-Employee Compensation, the tax year 2017 filing deadline is January 31, 2018 for both paper and electronic forms.

For all other reportable amounts (no amount in Box 7), your filing deadline remains February 28 for all paper filings or March 31 for all electronic filings.

Penalties may apply for not filing correct information returns (Code Section 6721): 

  • Don’t file a correct information return by the due date and a reasonable cause is not shown;

  • File on paper when you were required to file electronically;

  • Don’t report a Taxpayer Identification Number (TIN);

  • Report an incorrect TIN; or

  • Don’t file paper forms that are machine readable.

 

Anne Chan