1099-MISC: The Why, The Penalties, and The Rules.
For the average person, January is the beginning of a new year. The month is filled with many New Year’s Resolutions. No matter the outcome of these resolutions, it is safe to say we all believe it is going to be a great year. January has many important aspects. One that comes to mind is the requirement for businesses to send out Form 1099-Misc by January 31st.
There are many circumstances where a 1099-MISC must be filed. This may include rents, services performed, prizes or awards, other income payments, and a variety of other circumstances. To see a full list, please visit the IRS website, keyword 1099-MISC. A 1099-MISC must be filed for any independent contractor that was paid at least $600 in the course of your business. If you paid someone less than $600 or they are incorporated, a 1099-MISC is not required. All of which must be filed before January 31st of the following tax year.
There are penalties associated with 1099-MISC. The first is for not filing correct information returns. These may apply if you file after the January 31st due date, paper file when you were required to file electronically, file a return with missing or incorrect information, or file a paper return that is not machine readable. The second is for not providing correct payee statements. It may apply if you fail to provide a correct payee statement by the January 31st due date, you provide a statement that is missing all of the required information, or provide a statement with incorrect information. For small businesses with gross receipts five million or less, it can range from $50 to $550 per return. This can add up if you are submitting more than a handful of 1099-MISC.
If you have any questions or concerns, please feel free to contact SBS CPA Group at 260-407-5000. We are here to answer any of your questions.