The IRS imposes substantial penalties for late 1099 filings. Penalties also apply if the information provided is incorrect or a copy of the form isn’t provided to the recipients.
Overview
If a business fails to issue a Form 1099 by the deadline, the penalty varies from $60 to $330 per form. The penalties depend upon how long past the deadline the business issues the form. If a business intentionally disregards the requirement to provide a correct 1099 form, it’s subject to a minimum penalty of $660 per form or 10% of the income reported on the form, with no maximum.
Major 1099 Due Date
- Businesses are required to complete a Form 1099-NEC by January 31 to report payments of $600 or more made in the previous tax year to each nonemployee who performed services for them.
- Form 1099-MISC should be filed by March 1 (paper filing) or March 31 (if filing electronically). The form is used to report payments of at least $10 in royalties or at least $600 for items such as rent and medical or health care payments made to nonemployees and certain vendors in the previous tax year.
Note: If the due date falls on a weekend or holiday, it is extended to the next business day. To find out all the 1099 deadlines, click here.
Reasons for Penalties
If your business fails to file 1099 forms within the due date without any reasonable cause, you may be penalized by the IRS.
Here’s a list of all the possible situations:
- Fail to file by the deadline
- Fail to include all the required information to complete your 1099 Forms
- File with incorrect information
- File with paper forms when you’re required to e-file
- Report an incorrect TIN
- Forget to include a TIN, or
- File paper 1099 Forms that are not machine-readable
Penalties for late filing of information returns
The penalties vary depending on whether the business is small or large. The IRS considers you a small business if your average yearly revenue in the previous three years was $5 million or less.
Here are the penalties for different scenarios:
| Filing Time | Penalty per 1099 Form | Maximum Penalty per Year (Large Business) | Maximum Penalty per Year (Small Business) |
|---|---|---|---|
| Within 30 Days | $60 | $630,500 | $220,500 |
| From 31st Day to August 1 | $120 | $1,891,500 | $630,500 |
| After August 1 or Not Filed | $310 | $3,783,000 | $1,261,000 |
Exceptions
There are scenarios when a major natural disaster occurs. The IRS extends federal tax deadlines for affected taxpayers (under the IRS disaster relief program) if a federal disaster is declared. However, the extended due dates also apply to:
- Taxpayers outside the disaster area who need records from the area to meet a federal tax deadline.
- Relief workers from recognized organizations helping in the disaster area.
- Anyone visiting the disaster area who was injured or killed due to the disaster.
How to Avoid a Penalty?
To steer clear of penalties, adhere to the following guidelines:
- Timely Filing of Information Returns: Ensure that you submit information returns and provide payee statements to the IRS before the designated due date.
- Accuracy is Key: Double-check the returns and payee statements for accuracy, ensuring all information provided is correct.
- Check that you have validated the Name/TIN combination for each form recipient using either the IRS TIN matching system or a third-party product like Compliancely.
Request for time extension
To request an extension of time for filing an information return and providing payee statements, follow these steps:
-
Information Returns:
Use Form 8809 – Application for Extension of Time to File Information Returns to request an extension.
-
Payee Statements:
If you need an extension for furnishing payee statements to recipients, you can request it by faxing the extension of time request.
You can find details on the penalties from the IRS here.
How to eFile 1099s with Tax1099?
Looking for an efficient way to file your1099s online? IRS approved Tax1099 allows you to eFile 1099 forms with security and ease, all online.
Follow these 3 simple steps to file your 1099s on time and avoid penalties.
