Penalties for Not Filing a 1099 Form

Filing your own taxes can be an overwhelming process. There are lots of forms and they all need to be filled out with great care. One form that has recently received a lot of attention is the 1099-MISC form. The penalties have been changed and this can have a big impact on those who file the tax form improperly. To make sure you don't end up paying big bucks this tax season, here are the penalties you should know about. In 2015 the Trade Preferences Extension Act was signed into law that significantly increased the penalties for late filing or failure to file form 1099-MISC. These penalties became effective in 2016.  A summary of penalty changes follows:

The current penalty of $100 per return is increased to $250, and the maximum annual penalty is increased from $1.5 million to $3 million. For failures that are corrected within 30 days, the penalty is increased to $50 per return (from $30), and the maximum annual penalty is increased to $500,000 (from $250,000). Finally, for failures corrected after 30 days but before Aug. 1, the penalty is increased to $100 per return (from $60), and the maximum annual penalty is increased to $1.5 million (from $500,000).

The lower limitation on the maximum annual penalty for taxpayers with gross receipts under $5 million (typically defined as small businesses) is increased to $1 million (from $500,000), to $175,000 (from $75,000) for failures corrected within 30 days, and to $1.5 million (from $500,000) for failures corrected before Aug. 1.

What is the Penalty if I Don’t Issue a 1099 on Purpose?

The penalty for intentional disregard is increased to $500 per return (from $250), and the maximum annual penalty is increased to $3 million (from $1.5 million).

The combined maximum penalties for failure to file and failure to furnish have been increased significantly from $3 million to $6 million. Due to the increased penalty amounts, taxpayers who may have in the past opted to pay these penalties may now want to take steps to have these penalties abated and perform the necessary reporting going forward. When requesting a penalty abatement, taxpayers must establish that the failures were due to reasonable cause and not willful neglect (e.g., they must demonstrate a history of tax compliance, good faith efforts to immediately rectify noncompliance, etc.).

Penalties may also apply if you file on paper when you were required to file electronically; you report an incorrect TIN or fail to report a TIN; or, you fail to file paper forms that are machine readable.


What is the Penalty for Not Reporting a 1099 Form?

You may be subject to a penalty if you fail to report miscellaneous income that was reported on a Form 1099-MISC. Should you fail to report any miscellaneous income, your return may understate your tax liability.  Under these circumstances, the IRS can impose an accuracy-related penalty that equates to 20% of the underpayment. For example, if you failed to report miscellaneous income causing you to understate tax liability by $1000, the penalty could be $200 ($1000 x .20 = $200).

Getting a penalty from the IRS can be costly.The penalties add up when you make errors in filing multiple forms.  The good news is that penalties are relatively easy to avoid. Make your tax season easier by registering and e-Filing with today. We’ll help you e-File your taxes and help you avoid unnecessary penalties.

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