As tax season approaches, preparers around the country are gearing up for long hours, stressful days, and many cups of coffee. Often, these preparers find themselves hounding business clients for information regarding clients, vendors, and subcontractors and throwing the number “1099” around like it’s the winning lottery number. What people may not realize is that this is for a very good reason. As many are aware, the 1099s, depending on their classification and whether filed in paper form or electronically, have specific deadlines as to when they must be filed with the IRS (check out our calendars and alerts for dates and deadlines).
IRS Penalizes for Late 1099 Filings
Missing the IRS’s filing deadline will not only frustrate your clients or vendors, it may also subject you to some hefty penalties. Currently, the IRS penalizes individuals for failing to file a correct information return by its due date. Specifically, the penalty applies if you fail to file timely, you fail to include all the information required, or the information included is incorrect. We’ll discuss the penalties for inaccurate filings in another post, but for now, let’s focus on being late.
Keep in mind that the penalties are imposed based on the date you file the “Correct Information Return,” not just the date it’s first submitted. If you file late, but within 30 days, the penalty is $50 per return (a maximum of $556,500 per year or $194,500 for those businesses averaging less than $5 million in gross receipts over the last 3 years). If you file beyond 30 days but before August 1, the penalty increases to $110 per return (a maximum of $1,669,500 per year or $556,600 for small businesses).
If you really push the envelope and file after August 1 or simply not at all, the penalty is $280 per return (a maximum of $3,339,000 per year or $1,113,000 for small businesses). As you can see, the penalties can be hefty, especially for those of you with numerous clients or vendors for your business.
And by the way, if the IRS determines any failure to file a correct information return is due to intentional disregard of the filing or correct information filing requirements, they may hit you with a minimum penalty of $570 per information return with NO maximum penalty.
With the IRS announcing an increase in enforcement actions, this is a quick and easy way for them to generate revenue, and we can bet they will be paying attention.
It Pays to Be Punctual With Your 1099 Filings
As you can see, it pays to be punctual, so this year, let’s help those tax preparers out. Make sure they have the information in a timely manner so they can prepare these 1099s and send them on time. The earlier the preparers have the information, the more opportunity there is to use services like ours here at EINsearch, to validate the information and get timely submissions.
Punctuality and accuracy are key to successfully navigating this tax season. Are you preparing your own 1099s? Be sure to check out our services at EINsearch to validate your information and make sure it’s accurate, and check out our blog regarding incorrect information filings and the infamous “B” Notices.