Howard, LLP

Howard Insights: Issuing 1099-Misc Forms

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Dallas, Texas, November 2018 – Virtually every business will make payments to a non-employee that requires a 1099-Misc form be issued after year end.  Has your business made payments for legal services, consulting, accounting, design, rent, maintenance or cleaning to name a few?  These payments may very well require 1099-Misc forms and information return reporting to the IRS. Not knowing if, when and how to issue a 1099-Misc can be costly.

What are the potential penalties for a small business not issuing the required 1099-Misc forms?  Here are the 2018 IRS penalty rates:

  • $50 per 1099: if you file within 30 days of due date, maximum penalty of $191,000
  • $100 per 1099: if you file more than 30 days after the due date but by August 1, maximum penalty of $547,000
  • $270 per 1099: if you file after August 1, maximum penalty of $1,094,000
  • Intentional disregard: $530 per 1099 with no limitation

Additionally, penalties can also be assessed for:

  • Not filing correct information returns by the due date
  • Filing on paper when you were required to file electronically
  • Not reporting a Tax Payer Identification Number (TIN)
  • Reporting an incorrect TIN
  • Filing paper forms that are not machine readable

When you’ve made any of the following types of payments totaling $600 or more during the year, you are required to issue a 1099-Misc form to the recipient:

  • services by an independent contractor
  • rents
  • payments to an attorney (even if incorporated)
  • prizes and awards
  • other income
  • medical and healthcare payments
  • crop insurance proceeds
  • cash payments for fish from anyone engaged in the trade or business
  • generally, the cash paid from a notional principal contract to an individual, partnership, or estate
  • any fishing boat proceeds

What types of payments do not require a business to issue a 1099-Misc?

  • payments were made to corporations (not for medical or legal services)
  • total of all payments made to the individual or business is less than $600 in one tax year

Your business may also be required to issue additional 1099 series forms relating to, but not limited to, acquisition or abandonment of secured property, proceeds from a broker or barter exchange transactions, cancellation of debt, dividends and distributions, interest income, distributions from pensions, annuities, retirement or profit-sharing plans, distributions from HSA’s, etc.

If you are unsure if, when or how to file your 1099-Misc (and other 1099 series) forms and information returns for 2018 (and even prior years), or if you would rather not deal with the hassle and deadlines, please contact us today. It’s not too early to start the process for 2018 reporting!  Our team will be happy to assist you in determining which forms and information returns your business is required to file, preparing forms and information returns for you and E-filing on your behalf.