Form 1099 Late Filing Penalties from the IRS

What You Need to Know About Potential for Penalties

Think it's no big deal to skip 1099 filing for a few of the independent contractors you worked with this year? Not so fast!

As the IRS continues to enforce 1099 compliance by small businesses, the risk of not filling out those forms is too great. In fact, the IRS now asks you to answer these two questions on all federal income tax returns:

  • Did the corporation make any payments in (year) that would require it to file Forms(s) 1099?
  • If "yes," did or will the corporation file required Forms 1099?

By responding to these questions, you are indicating (under penalty of perjury) that your tax return is accurate and complete — including 1099 filing.

Why a 1099 Late Filing Penalty Is Not Worth the Risk

Specifically, not providing a correct statement (intentional disregard) carries a penalty of $560 per 1099, with no maximum for the year.

It pays to mind the tax-filing deadlines, too. Late filing of mandatory 1099s could lead to penalties ranging from $50 to $280 per 1099, with a maximum of $1,130,500 a year for your small business. The amount of the penalty is based on when you file the correct information return, as follows:

  1. $50 per 1099, if you file within 30 days of due date; maximum penalty of $197,500
  2. $110 per 1099, if you file more than 30 days after the due date but by August 1; maximum penalty of $565,000
  3. $280 per 1099, if you file after August 1; maximum penalty of $1,130,500

Regarding the maximum penalties, the IRS considers you to be a small business if you made $5 million or less in average annual revenues for the previous three tax years. However, penalty amounts can increase beyond maximum listed above if intentional disregard applies.

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