1099 Penalties and Fines
The IRS really wants you to make sure all of the information on 1099s are accurate and that you file on time. In addition to penalties for errors on forms, the IRS fines for late forms, missing forms, wrong or missing taxpayer information, and not filing electronically when you should have. Here are the penalties to be aware of:
Late Forms or Uncorrected Errors
The IRS imposes penalties for failure to file information returns with the IRS on a timely basis (as well as the failure to furnish returns to payees on a timely basis). In addition, the IRS may also assess penalties if a filer fails to include all of the information required to be shown on a return (e.g., taxpayer’s TIN) or reports incorrect information (e.g., incorrect dollar amount). Fines range from $50-$260 PER FORM for Late filing or Not filing at all.
Missing Forms Due to Intentional Disregard
If a filer neglects to send forms altogether (to either the IRS or the contractor) when the filer knew it should have (what the IRS classifies as “Intentional Disregard”), the penalty has been increased to $530 per form with no limitation or cap.
Not Filing Over 250 Forms Electronically
Businesses that are required to file over 250 1099s of the same type (250 1099-MISC forms, for example), must file electronically or face fines of $250 per form.
Exceptions to the Penalty
Concerned about facing a penalty? Don’t give up hope, you may fall into an exception if you faced mitigating circumstances and act fast to solve the issue.
Missing or Incorrect TINs
If required 1099-K or 1099-MISC forms are missing TINs (SSN or EIN) or have incorrect TINs, then the IRS can impose fines of $260 per form. That fine can be reduced to $50 if a correction is filed within 30 days of the deadline.
The penalty may be waived by showing the failure(s) was due to reasonable cause and not to willful neglect.
What constitutes reasonable cause?
According to IRS guidance:
Filers must establish that they acted in a responsible manner both before and after the failure occurred, and that:
- There were significant mitigating factors (for example, an established history of filing information returns with correct TINs)
- The failure was due to events beyond the filer’s control (for example, a payee did not provide a correct name/TIN in response to a request for the corrected information).
Acting in a responsible manner includes making an initial solicitation (request) for the payee’s name and TIN (Form W-9) and, if required, an annual solicitation. Upon receipt of this information, it must be used on any future information returns filed.
Give our office a call if you have any questions regarding these filing requirements or other tax questions, 412-826-8600.
The information contained is a summary of certain United States federal income tax rules relating to the reporting and taxation of payments. This discussion is based upon the provisions of the Internal Revenue Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the Internal Revenue Service, all as in effect as of the date hereof. These authorities may change, possibly with retroactive effect. Any such change in the law could alter or modify the statements and conclusions set forth. The summaries included do not purport to deal with all aspects of U.S. federal income taxation that may affect you in light of your individual circumstances. The information contained does not address any reporting or tax consequences under state, local or foreign tax laws.
The reporting requirements contained are included for general information only. It is not intended to be, nor should it be construed to be, legal or tax advice to you. ACCORDINGLY, YOU ARE URGED TO CONSULT WITH OUR OFFICE OR YOUR OWN TAX ADVISERS REGARDING THE SPECIFIC TAX CONSEQUENCES OF YOUR IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.