The filing of 1099 forms has been something businesses have been required to file for years. Although penalties have been assessed for the non-filing of these forms for some time, many taxpayers have not taken the filing of this particular information return very seriously
Income tax returns for 2011 have been enhanced to include the following two questions:
Did you make any payments in 2011 that would require you to file Form(s) 1099?
If “Yes,” did you or will you file all required Form(s) 1099?
We have looked through the instructions for all business returns and, while none of them contain specific instructions to these questions, we are suspecting that the IRS may use the answers to these questions as an additional item on which to audit taxpayers.
Below is listed the more common Form 1099s and when they are required:
- 1099-INT – Payments made in the course of your trade or business to any individual for interest when the total of such payments equals or exceeds $600.00 during the course of the year.
- 1099-DIV – Payments made to any person, by a “C” Corporation and, in some instances, an “S” Corporation, when the payments equal or exceed $10.00 during the year.
- 1099-MISC – Payments you made in the course of your trade or business to any person for the following:
- All types of rents and royalties totaling at least $600.00 for the year (includes the rental of real estate, machine rentals, and pasture rents).
- Payments of prizes or awards whether in cash or merchandise.
- Fees or commissions paid to any non-employee/independent contractor for services they performed for you (such as contract labor and trucking) totaling $600.00 or more for the year.
- Attorney fees of $600.00 or more paid in the course of your trade or business (this requirement includes amounts paid to individuals or corporations).
- Royalties paid of $10.00 or more.
- Payments of $600.00 or more paid in the course of your trade or business to a physician or other supplier or provider of medical or health care services (pharmacies and tax-exempt hospitals or extended care facilities are exempt).
- OTHER (Nominee/Middleman returns) – If you receive a Form 1099 for amounts that actually belong to another person, you should file a Form 1099 showing the actual owner as the recipient and yourself as the payer. Other transactions that may need to be reported include: transactions by brokers or barter exchanges, distributions from retirement plans, and sales of real estate.
The penalties for not filing the necessary forms or not filing them on time have been provided below:
Failure To File Correct Information Returns by the Due Date (Section 6721)If you fail to file a correct information return by the due date and you cannot show reasonable cause, you may be subject to a penalty. The penalty applies if you fail to file timely, you fail to include all information required to be shown on a return, or you include incorrect information on a return. The penalty also applies if you file on paper when you were required to file electronically, you report an incorrect TIN or fail to report a TIN, or you fail to file paper forms that are machine readable.
- $30 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small businesses, defined below).
- $60 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for small businesses).
- $100 per information return if you file after August 1 or you do not file required information returns; maximum penalty $1,500,000 per year ($500,000 for small businesses).
If we assist you in preparing your Forms 1099 we will be able to answer the questions on your tax return for you. If we don’t prepare the Forms 1099 for you, please know that we will be asking you if you have prepared them so that we can accurately answer the questions. Even if past the January 31 date by which you should have provided these forms to their recipients you can/should get any forms filed which you may have overlooked to minimize any penalties. We are here to help you get that done.