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Home » 1099 Tax Forms are NOT Optional– You are Required to File 1099s by Law
While businesses are careful to report the compensation made to employees on payroll, they often fail to report the payments made towards non-employment compensation. This can include disbursements made for contractual work, part-time jobs, interest, rentals, royalties, etc.
However, the Internal Revenue Service (IRS) requires entities to report all types of non-employment compensations of $600 or more. This is done through the 1099 tax forms (a group of tax forms) used to track income that falls outside the realm of traditional W2 wages. In this case, the payer is responsible for filling out the form and sending one copy to the IRS and another to the taxpayer or the income recipient.
So, if you wonder- “Am I required to file a Form 1099 or other information return?” The answer is Yes! If you paid to a small business or self-employed (individual), you are most likely required to file a 1099 to the IRS.
There are several types of 1099 tax forms, each designated for specific sources of income. Some common types of 1099 forms are:
Note: The due date for sending the 1099 NEC to the IRS is January 31 of the year.
The 1099 tax forms ensure accurate reporting of all sources of income by acting as a checks-and-balances system. These forms are used so that the paying entity can also report the payments made on their own tax returns.
A majority of all 1099s are matched against the individual and the entity’s tax returns. If there is a discrepancy in matching the 1099 to the recipient’s tax return, the IRS may inform the taxpayer about the additional taxes that are due.
Failure to file the tax information under Form 1099 can invite hefty penalties from the IRS. The IRS charges separate penalties for failing to:
The penalty for missed deadlines can range from $60 to $310 per form. Cases of non-compliance resulting due to negligence are subject to a minimum penalty of $630 per form.
Note that the IRS charges interest on penalties. The date from when the interest gets added to the penalty depends on the penalty type and amount.
Here are a few points to remember when filing information returns with the IRS:
While all this information may seem overwhelming at first, Tax1099 is here to simplify your journey toward tax compliance. With its intuitive interface and efficient features, the platform empowers users to effortlessly generate, file, and distribute 1099 forms, transforming what can be a complex and time-consuming task into a seamless experience.
Consider Tax1099 as your ally in navigating the intricacies of tax compliance—simplify your tax reporting and stay ahead in the game with Tax1099 by your side.
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