Are You Required To File Forms 1099-MISC?

Jan 29, 2015

The February 2 deadline to have Forms 1099 to receipts is less than a week away. As a business owner, the Internal Revenue Service (IRS) requires you to submit “information returns”, Forms 1099, in order to counteract tax evasion. With more individuals becoming self-employed each year, it’s important to review the IRS rules and requirements for issuing Forms 1099.

Requirements Keep in mind that there are several variations of the 1099 form, but the focus of this article is Form 1099-MISC. The basic rule is if you use an unincorporated service provider and you pay them $600 or more for the year, you are required to issue them a Form 1099-MISC. For example, paying a contractor who is not incorporated to renovate your office for $1000 would require completing and submitting a form. Reporting such payments is generally only required if the recipient of the payment is not a corporation – an individual, partnership, a limited liability company treated as a partnership or sole proprietorship. Payments made to corporations in the case of medical and health care payments and in the case of legal fees paid to attorneys are exceptions to this general rule and require reporting. Payments made for personal purposes do not require issuing a Form 1099-MISC.

Deadlines For year 2014, Form 1099 must be provided to the independent contractor no later than February 2, 2015. Filing Form 1099 by paper must be completed by March 2, 2015 to the IRS. This date is extended to March 31, 2015 if you electronically file.

Penalties New, higher penalties introduced with the Small Business Jobs Act remain effective as of January 1, 2011. Companies intentionally disregarding the requirement to provide a correct payee statement are subject to a minimum penalty of $250 per statement, with no maximum. Filing late, but within 30 days of the deadline, incurs a first-tier penalty of $30 per 1099, with a maximum of $75,000. In contrast, filing more than 30 days late, but prior to August 1st triggers a per-form penalty of $60 up to $200,000 total, while not filing or filing after August 1st will cost you $100 per-form up to $500,000.

By: Katie Mokry, Senior Accountant

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