The information on Form 1099 is also reported to the IRS so that the information can be matched to the individual’s tax return and ensure that the income is being reported properly.
If you don’t issue 1099s, you will pay noncompliance penalties to the IRS.
While there is more than one type of 1099 form – since it is used for a wide variety of transaction reporting – small business owners generally use the 1099-MISC form to report payments made to non-employees doing work for them.
The guidelines for who must receive a 1099-MISC form are as follows:
If you are required to issue a Form 1099 to a contractor or other individual, you must send it on or before January 31st of the year following the tax year in which you paid the individual; and you must report the information to the IRS by February 28th. Also file Form 1096 with the IRS to summarize all 1099-MISC forms.
Some states require copies of 1099 forms, so check with your state to see what the requirements are and the due dates.
Filing 1099-MISC forms beyond the due date generates steep IRS fines, so be sure to get them in on time.
If you file the 1099-MISC up to 30 days beyond the return due date, you’ll pay $15 per 1099 with a maximum fine of $25,000 per business.
If you file between April 1st and August 1st of the year in which the 1099 was due, you will pay $30 per 1099, up to a maximum fine of $50,000.
If you file or make corrections after August 1st, the fine is $50 per 1099 and a maximum fine of $100,000.
This post was published on January 10, 2012