Attention businesses, did you pay anyone besides your employees this year? There is a filing deadline approaching! If you paid non-employee individuals and/or non-corporate businesses (like LLCs and partnerships) $600 or more for services during 2018, you are required to issue IRS Form 1099-MISC to them by January 31^st. There are costly penalties for noncompliance!

1099 Basics

Common examples of who Form 1099-MISC must be issued to, include:

1. Non-employee individuals that your business paid at least $600 or more in rents, services, prizes and awards, medical and health care payments, or other income payments.
2. Non-corporate business entities, like LLCs and partnerships that you paid at least $600 or more in rents, services, prizes and awards, or other income payments.
3. Attorneys, even if incorporated, that you paid gross proceeds of $600 or more.

Are there different versions of 1099?

Yes—there are several versions of the Form 1099. The version required to be provided to nonemployees is based on the type of income that is being reported. The 1099-MISC is essentially the most widely used version and is used for nonemployee compensation, rental income, royalties, attorney fees, and boat proceeds. Read our blog, “Guidelines on filing Form 1099-MISC”.

Other versions include…..

• 1099-INT is used to report interest income.
• 1099-S covers sales and exchanges of real estate or land.
• 1099-C is used for cancelled or forgiven debt.
• 1099-R is used for life insurance contracts, retirement plans, annuities, and pensions.
• 1099-DIV is used for dividends and distributions of liquidations and capital gains.

Note: the timeline to file Form 1099-MISC in 2019 has been shortened. The due date to issue and e-file to the IRS is January 31, 2019. The IRS allows a 30-day extension of time to file Form 1099-MISC by completing and submitting Form 8809, by January 31, 2019.

Penalties for not filing

In 2019, the basic penalty for neglecting to timely file correct returns due can be as high as $270 for each information return, with a maximum penalty per year of $3,282,500. When the information returns are corrected by August 1^st, a lesser penalty is imposed.

The IRS reduces maximum fines for small businesses with less than $5 million in gross receipts for the past three years, but the fine increases to $540 or more per return, with no maximum penalty, if the IRS can prove that your business was intentionally failing to file.

Moreover, late filing of mandatory 1099s could lead to penalties ranging from $50 to $100 per 1099, with a maximum late filing penalty of $1,094,000 a year for small businesses.

W-2s also required to be issued by January 31^st

Employers must file and postmark W-2s by January 31^st as well. Form W-2 reports the amount of federal, state and other taxes withheld from employees’ paychecks.

Do you need assistance with your 1099 filing this year? Contact us.