1099 Form Compliance

Information

It’s that time again! The IRS focuses heavily on taxpayer compliance with information reporting laws. This year there is a new form 1099-NEC (non-employee compensation) in addition to the 1099-Misc (rents, medical, royalties, etc.)

All Form 1099s must be e-filed or mailed to the recipient and the IRS by January 31, 2021. Penalties will be charged to businesses for each form received after that date. If you would like us to prepare these forms for you, please submit all information ASAP or no later than January 19th so we can prepare the forms and return the package to you before the due date. There are no extensions for these forms.

If you fail to provide Form 1099s and cannot show reasonable cause for the failure, you may be subject to a penalty. The penalty applies if you fail to provide the statement by the deadline, fail to include all information required to be shown on the statement, or include incorrect information on the statement. The penalty is:

  • $50 per information return for returns filed correctly within 30 days after the due date (by February 28 if the due date is January 31), with a maximum penalty $250,000 a year ($75,000 for certain small businesses);

  • $110 per information return for returns filed more than 30 days after the due date with a maximum penalty $500,000 a year ($200,000 for certain small businesses); and

  • $280 per information return for returns filed with missing or incorrect name/TIN combo or not filed at all, with a maximum penalty $1,500,000 a year ($500,000 for small businesses).

 

Unless you specifically engage our firm to prepare your 1099s, you are responsible for preparing and filing Forms 1099. If you are audited, the IRS will want documentation of expenses and will look at whether 1099s were filed. Any wage and labor amounts to be deducted on your return will be separately classified and will not be hidden or bundled with other expenses, since there are specific lines on the returns for wages and labor.

Above is a link to a Form W-9 for your convenience. Please make copies and have your subcontractors provide current information for this year’s form.

If you are audited, the IRS will request documentation of expenses and will require copies of 1099s filed for the year-end 2019.

The IRS could charge a penalty for forms filed with incorrect information. Also, if your business has moved or if you have changed the mailing address please provide us with the new address for the forms.

Please feel free to reach out to us with any questions or concerns regarding your 1099 filing requirements.

Contact Information

Dianna Gilluly in our Toms River Office at dgilluly@hfacpas.com

James Weislo in our Red Bank Office at jweislo@hfacpas.com