Do You Know if You Need to File a 1099-Misc by January 31st?

Originally Published in the Pacific Grove Hometown Bulletin

January 4, 2012

Happy New Year!   Now that the holidays are over and you are starting those New Year’s Resolutions, perhaps you should add one more to the mix – reviewing whether or not you need to file 1099s.  Penalties have doubled this year, and if you paid a non-employee over $600 in the course of your business during 2011, you likely need to file a 1099-Misc by the end of this month.

Penalties

Due to the strain of the economy, pressure is being put on taxing authorities to collect revenue wherever they can.  One way of collecting this revenue is through penalties for failure to comply with regulations.  This year we are witnessing increasing penalties, the creation of new penalties, and the enforcement of old penalties not previously enforced.  The filing of 1099s is no exception and is a large target because it also helps the taxing authorities identify people who fail to report income (and pay tax) of their own volition.  You may think, “I have never done this before,” but given the increased enforcement, this is a hollow reason for not reconsidering your position.

The federal penalties have doubled this year to $100 per 1099 for failure to provide a 1099 to a recipient, and another $100 for failure to file a copy with the IRS (I am sure you will find it a relief to know that the combined penalties are capped at $3 million for most of us!).  California has matching penalties of $50 each and they can also disallow the deduction for the amount you paid the person in question.

Who Gets 1099-Misc Forms

Generally, 1099-Misc forms are filed for service-providers that your business (sole proprietorship, nonprofit, or other business entity) pays to someone other than a corporation over $600 during a year.  There are many exceptions and reading through the instructions for form 1099-Misc (available online) is a great way to find out if you have filing requirements.  Exceptions include payments to attorneys, medical service providers, royalties, fish payments, direct sellers, and many more.  Just because you have a CPA or someone else prepare your taxes does not mean they know all the people for which you need to file 1099s.

When to File

Form 1099-Misc is required to be mailed to recipients by January 31st.  You also have to file a copy with the IRS by February 29th.  Copies mailed to the IRS have to be filed on specific forms printed in red ink, unless they are electronically filed by professionals or other online service providers.  The printed forms and software can be found at your local office supply store.

If you need additional help with a 1099 filing determination or with actually filing the 1099s this year, you should seek professional help as soon as possible.

Prior articles are republished on my website at www.tlongcpa.com/blog.

IRS Circular 230 Notice: To the extent this article concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.

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2 comments so far

  1. Danuta on

    Greetings! Very useful advice in this particular article! It’s the little changes which will make the greatest changes. Thanks a lot for sharing!

    • Travis H. Long, CPA on

      Just now catching up to some of the comments made during the tax season! Thanks again, and I am glad it has been helpful to you.


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