In 2015, Congress decided to raise the penalties for late filing of forms 1099. The forms are generally due to be sent to the taxpayer by January 31st though some forms have other due dates. If filed electronically, the forms 1099 are due to IRS by March 31st. Paper filings, if allowed, are generally due by the end of February. Generally, if you have to file a lot of forms then you must file electronically.
|When 1099||Before 2016||After 2015|
|sent||Normal||Small business||Normal||Small business|
|Per form||Limit||Per form||Limit||Per form||Limit||Per form||Limit|
|30 days or less late||$30||$250,000||$30||$75,000||$50||$500,000||$50||$175000|
|Before Aug. 2||$60||$500,000||$60||$200,000||$100||$1,500,000||$100||$500,000|
|After Aug. 1||$100||$1,500,000||$100||$500,000||$250||$3,000,000||$250||$1,000,000|
|Intentional Failure *||$250||No limit||$250||No limit||$500||No limit||$500||No limit|
* Some forms have higher penalties if failure to file is intentional.
The per form penalties apply to the form sent to the recipient and to the form due to IRS. So failing to send one form 1099 to the recipient and a duplicate to IRS before August 2 results in a total penalty of $500. Intentionally not filing one form with IRS and not sending a copy to the recipient is $1,000. As an example, XYZ company decides to not file any of the 10 forms 1099-MISC it should file. The penalty for not sending the forms to the recipients is 10 times $500 plus for not sending to IRS is 10 times $500, total penalty is $10,000.
Mighty expensive penalty for not filing out 10 relatively simple forms in a timely manner.
IRS is allowed to waive the penalties for reasonable cause. I just did not feel like it is not a reasonable cause. I did not know is pretty weak as all the major income tax forms for businesses now ask if you had to file a Form 1099 and then ask if you did.
What to do now
Paper filing is out since they are already late. Big businesses should already have in-house filing software or have contracted with a third-party for the service. Smaller businesses, landlords, and others required to file should use one of the online services before the deadline. Sure you may still owe the late fee for sending the recipient copy late but at least you can avoid the penalty for late filing with IRS. The online services typically send a copy to the recipient so that makes the $5 or so cost more acceptable – nor form to buy, no envelope to buy, and no extra cost for postage.
Here are a couple of options:
Yearli by Greatland
And another Track 1099
If you use a payroll service, most of them also offer 1099 filing for an additional fee.