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Now is the time to determine if you made any payments during the 2018 tax year that would require you to file Form 1099. If you paid $600 or more in compensation to a non-employee or an unincorporated business, you are most likely required to report the amount on a Form 1099. Generally, any person, including a corporation, partnership, individual estate, and trust which makes reportable transactions must file a Form 1099. The type of reportable transaction determines the specific Form 1099 which must be filed. One of the most common forms issued is Form 1099-MISC. Form 1099-MISC is required for each person to whom you have paid any of the following during the year:
- at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest;
- at least $600 in rents, services performed by someone who is not your employee, prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish, or, generally, the cash paid from a notional principal contract to an individual, partnership, or estate;
- any fishing boat proceeds,
- Gross proceeds of $600 or more paid to an attorney during the year.
If you are filing Form 1099-Misc and reporting amounts in Box 7: Non-employee Compensation, the IRS filing deadline is on or before January 31. If you are not reporting amounts in Box 7, then the deadline is February 28 for paper filings or March 31 for electronic filings. However, regardless of which boxes you are reporting, Form 1099 is due to the recipient by January 31st.
Failure to file these forms by the required deadline is considered a violation of IRS regulations and is subject to penalties. The Trade Preferences Extension Act of 2015 increased the penalties for failure to file correct information returns to $270 per failure, up to $1 million per calendar year for small businesses. The penalties are doubled to $540 for intentional disregard. If the failure is corrected within 30 days of the required filing date, the penalty is $50 per failure up to $191,000. If the failure is corrected after 30 days but before August 1st, the penalty is $100 per failure up to $547,000.
If you are a business owner, you should have an ongoing procedure for requesting a W-9 from any vendor you expect to pay more than $600 during a calendar year. The filing of these forms should be taken seriously.
With only a few weeks to go until the deadline to file, please do not hesitate to contact our office if you need assistance with your filings.
