Penalties for Not Filing a 1099-Misc

If you receive income from a source other than earned wages or salaries, you may receive a Form 1099-MISC, Miscellaneous Income.Generally, the income on this form is subject to federal income tax and state income tax. The IRS requires those that pay miscellaneous income in the course of their trade or business to issue Form 1099-MISC to their payees and requires the payees to include these payments on their tax returns.

Form 1099-MISC

Several types of income can be reported on Form 1099-MISC, including non-employee compensation, rent, royalties and fishing boat proceeds. One of the most common reasons for receiving a 1099-MISC is performing work as an independent contractor. If you have the payer withhold federal income tax from your  payments, the payer will report the withholding in Box 4. State income tax withholding is reported in Box 16.

Penalties for not issuing Form 1099-MISC

People and companies that make payments of miscellaneous income to individuals must give the payee Form 1099-MISC by the end (in most cases) of February of the year following the tax year in which the income was paid. For example, if you received miscellaneous income in 2012, the paying institution or individual must issue Form 1099-MISC by February 28, 2013. If the institution fails to do so, the penalty against the company varies from $30 to $100 per form ($500,000 maximum per year), depending on how long past the deadline the company issues the form. If a company intentionally disregards the requirement to provide a correct payee statement, it is subject to a minimum penalty of $250 per statement, with no maximum.

Penalties for not reporting Form 1099-MISC

The amount of the penalty is based on when the correct 1099 is filed:

• $30 per information return if you correctly file within 30 days of the due date (by March 30 if the due date is February 28). The maximum penalty is $250,000 per year ($75,000 for small businesses).
• $60 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for small businesses).
• $100 per information return if you file after August 1 or you do not file required information returns. In this case the maximum penalty is $1,500,000 per year ($500,000 for small businesses)

If you do not file corrections and you do not meet any of the exceptions to the penalty described above, the penalty is $100 per information return.  

Exceptions to the penalty

The following are exceptions to the failure to file penalty.

• The penalty will not apply to any failure where you can furnish a reasonable cause to prove that it was not a willful neglect. In other words, you must be able to show that your failure was due to an event beyond your control or due to significant mitigating factors. You must also be able to show that you acted in a responsible manner
  and took steps to avoid the failure.


• An insignificant error or omission is not considered a failure to include correct information. An insignificant error or omission does not stop the IRS from processing the return, from correlating the information required to be shown on the return with the information shown on the payee's tax return, or from putting the return to its actual use. Errors and omissions that are not considered as in significant are those that are related to
  (a) a TIN, (b) a payee's surname, and (c) any money amount.


• Deminimis rule for corrections. Even though you cannot show reasonable cause, the penalty for failure to file correct information returns will not apply to a certain number of returns if you:
  • a. Filed those information returns,
  
  
  • b. Either failed to include all the information required on a return or included incorrect information, and
  
  
  • c. Filed corrections by August 1.

If you meet all the conditions in a, b, and c above, the penalty for filing incorrect returns (but not for filing late) will not apply to more than 10 information returns or ½ of 1% of the total number of information returns you are required to file for the calendar year.
Intentional disregard of filing requirements. If any failure to file a correct information return is due to intentional disregard of the filing or correct information requirements, the penalty is at least $250 per information return with no maximum penalty
                 

How to report Form 1099-MISC on your return

To avoid an underpayment penalty, be sure to include your miscellaneous income on your Form 1040. If your income is non-employee compensation, you’ll need to complete, in most cases, Schedule C, Profit or Loss From Business, and then transfer the net earnings to Line 12. For rents or royalties, complete Schedule E, Supplemental Income or Loss, and then enter the net income on Line 17 of Form 1040.

1099 forms

Receiving 1099 form and reporting it to IRS is not an uncommon thing. 1099 form is used to report various incomes other than wages, salaries and tips for which form W2 is used.  1099 forms are given to individual contractors for services rendered by them to small businesses. Businesses provide a 1099 form only if the individual contractor has earned an income of $600 and above. If not, then no 1099 form is required. However there are various 1099 forms for different purposes. Below is the description provided for  all types of 1099 forms:

FORM 1099-A

 What is form 1099-A?
If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the canceled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven or the property is abandoned or foreclosed, the amount you received as loan proceeds is reportable as income. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-A, Acquisition or Abandonment of Secured Property, or Form 1099-C, Cancellation of Debt.

 

When to file form 1099-A? File Form 1099-A, Acquisition or Abandonment of Secured Property, for each borrower if you lend money in connection with your trade or business and, in full or partial satisfaction of the debt, you acquire an interest in property that is security for the debt, or you have reason to know that the property has been abandoned. You need not be in the business of lending money to be subject to this reporting requirement.

FORM 1099-B

 What is form 1099-B?
A form issued by a broker or barter exchange that summarizes the proceeds of all stock transactions. The sale of a stock will be accompanied by a gain or loss, which must be reported to the IRS when you file your taxes. Specifically, figures from form 1099-B are used on IRS Form 1040, Schedule D. For example, let's assume you sold several stocks within the last year and the proceeds of the transactions equal a capital gain of $20,000. The amount gained from the sale of the stocks will be issued in form 1099-B by your broker and this amount must be included when you file your income taxes.

 

Who is supposed to file form 1099-B? A broker or barter exchange must file Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, for each person:

• For whom the broker has sold (including short sales) stocks, bonds, commodities, regulated futures contracts, foreign currency contracts (pursuant to a forward contract or regulated futures contract), forward contracts, debt instruments, etc., for cash,
• Who received cash, stock, or other property from a corporation that the broker knows or has reason to know has had its stock acquired in an acquisition of control or had a substantial change in capital structure reportable on Form 8806, or
• Who exchanged property or services through a barter exchange

FORM 1099-C

 When to file form 1099-C
Do not file Form 1099-C when fraudulent debt is canceled due to identity theft. Form 1099-C is to be used only for cancellations of debts for which the debtor actually incurred the underlying debt. File Form 1099-C, Cancellation of Debt, for each debtor for whom you canceled a debt owed to you of $600 or more if:

• You are an entity described under Who Must File
• An identifiable event has occurred. It does not matter whether the actual cancellation is on or before the date of the identifiable event.
• Form 1099-C must be filed regardless of whether the debtor is required to report the debt as income.
• The debtor may be an individual, corporation, partnership, trust, estate, association, or company.
• Do not combine multiple cancellations of a debt to determine whether you meet the $600 reporting requirement unless the separate cancellations are under a plan to evade the Form 1099-C requirements.

FORM 1099-S

 What is form 1099-S?
Form 1099-S Proceeds from Real Estate Transactions, is the official form used to report the sale or exchange of real estate. Generally, you are required to file form 1099-S to report a transaction that consists in whole or in part of the sale or exchange for money, indebtedness, property, or services of any present or future ownership interest in any of the following:

• Improved or unimproved land, including air space;
• Inherently permanent structures, including any residential, commercial, or industrial building;
• A condominium unit and its appurtenant fixtures and common elements, including land;
• Stock in a cooperative housing corporation (as defined in section 216); and
• Any non-contingent interest in standing timber.

FORM 1099- PATR

 What is form 1099-PATR and who is supposed to file it?
File Form 1099-PATR, Taxable Distributions Received from Cooperatives, for each person to whom the cooperative has paid at least $10 in patronage dividends and other distributions described in section 6044(b) or from whom you withheld any federal income tax under the backup withholding rules regardless of the amount of the payment. A cooperative determined to be primarily engaged in the retail sale of goods or services that are generally for personal, living, or family use of the members may ask for and receive exemption from filing Form 1099-PATR. Report on Form 1099-PATR only items of income, expenses, and credits that you properly pass through to patrons for reporting on the patron's tax return.

 

Exceptions to file form 1099-PATRGenerally, you are not required to file Form 1099-PATR for payments made to a corporation, a tax-exempt organization including tax-exempt trusts (HSAs, Archer MSAs, and Coverdell ESAs), the United States, a state, a possession, or the District of Columbia. 

FORM 1099-MISC

 What is 1099 misc form?
1099 misc form is used to report certain types of payments made in the course of a trade or business. If you're a small business owner who has hired the services of an independent contractor or freelancer, you may need to file and submit the 1099 misc form to both the Internal Revenue Service and the person or business that you paid. Normally, a 1099 misc form has to be reported if at least $600 has been paid to the recipient.

FORM 1099-K

 What is tax form 1099-K?
Payments made with a credit card or payment card and certain other types of payment, including third party network transactions, must be reported on Form 1099-K by the payment settlement entity (PSE) under section 6050W and are not to be reported on 1099 Misc form. In simple words, a 1099-K form is used to report income that you received from credit cards, debit cards, or other electronic payments, such as eBay and Pay Pal. Businesses that will see their income reported on form 1099-K are those with more than 200 credit card transactions and more than $20,000 gross income from credit card sales

FORM 1099-INT

 What is form 1099-INT?
1099 INT is the official form issued by all payers of  interest  income to investors at year's end. Form 1099-INT break down all types of interest income and related expenses.  Payers must issue Form 1099-INTs for any party to whom they paid at least $10 of interest during the year. In simple words, IRS Form 1099-INT is sent to those taxpayers who received interest income during the current tax year, such as that from a savings account.

FORM 1099-DIV

 What is form 1099-DIV?
A form sent to investors by investment fund companies. The form is a record of all taxable capital gains and dividends paid to an investor, including those that have been re-invested in a given taxation year. The amounts stated on the form represent the amounts that fund companies are attributing to each investor's investment return for the year and reporting to the IRS. Investors use Form 1099-DIV to help report income received from investments on their tax return each year. In other words, Form 1099-DIV reports the ordinary dividends, total capital gains, qualified dividends, non-taxable distributions, federal income tax withheld, foreign tax paid and foreign source income from each investment account held by a fund company. Forms are not sent to investors who received or re-invested a total of less than $10 per fund. 

 The filing season for 1099forms starts January 1^st 2013. Businesses have to ensure that they provide the correct and required 1099 forms to the contractors/payee by January 31^st 2013. Businesses also have to efile 1099 forms with the IRS compulsorily. The filing deadline for paper filers is Feb 28^th 2013 and for electronic filers is April 1st 2013.

1099 Forms Are Due Soon

It's a new fiscal year, which means it's time to start filling out and filing your 2012 1099 forms if you want a stress-free tax season.

As you probably know, small business owners file self-employment taxes every fiscal year.  Among the requirements: You have to file a 1099 form for any taxable income that doesn't show up on a W-2 form.

You can spend hours reading through the IRS' website about all the changes and updates. To help you out, here are three tips that every small business owner should know:

·         Make sure you send and receive the correct 1099 forms. There are many different types of 1099 forms, which the IRS refers to as "information returns." Most must be mailed to recipients this month, and then reported to the IRS in February. For employers who deal with independent contractors, Form 1099-MISC should be on your to-do list right now; you may also soon be receiving a Form 1099-K from each third-party payment processing service that you used in 2012.

·         1099-MISC forms should go out now. Business owners have until Jan. 31 to send out 1099-MISC forms to any individual who was paid $600 or more for services in the past year. This doesn't apply to corporations or LLCs that were paid for services, but it does apply to contract employees and individual contractors. You then have until the end of February to file the forms with the IRS. But make sure you give the payee time to review the 1099-MISC and correct any mistakes.

·         Pay attention to the 1099-K. This month, most businesses should receive a 1099-K from every payment processor you worked with during the year. This includes banks, credit card companies, and services like PayPal. The 1099-K was introduced last year, and it's only for businesses that sell more than $20,000 in goods or services through at least 200 transactions in a calendar year. Business owners should use their 1099-K forms as a way to check their calculations when completing their tax returns

WHO SHOULD FILE 1099 FORMS

A 1099 tax form is an informational reporting form which is required to be filed with the IRS if any payment of $600 and above has been made by businesses or individuals to independent contractors in year 2012. The type of payments that are legible to be filed on form1099 are: Rent, health care payments, services offered by freelancers, attorneys, royalties, Payments to crew members by owners or operators of fishing boats and etc.

In the case of agricultural sector, a farmer would have to file tax form 1099 for year 2012 if they want to write off the cost of the custom hay baling they had done this year. Services that require a farmer to file a 1099 form include: painting the barn, hoof trimmers or certified crop consultants.

Services that exempt you from filing 1099 forms include hauling freight which means livestock hauling or grain hauling is not required to be reported on 1099 form. Moreover, 1099 filing is not required to be reported for the purchase of equipment parts, seeds or fertilizers. Also a farmer is not supposed to file a 1099 form is he spends less than $600.

It is very necessary that farmers maintain their books on the payments they have made for year 2012-2013 because if they fail to file 1099 forms with the correct information then it can cost them huge Penalties and losses.

Failure to file a 1099 form, could cost a farmer fine of $100 per form. If the internal revenue finds out that it was a willful neglect on the part of the farmer to file the 1099 form, then it can result in greater costs for the farmer in the form of $250 per filing. Sadly, small farmers who are unaware of such information fail to file the 1099 forms and thus have to face great adversities.

If business is not incorporated, then a 1099 form is required for all service providers. If the farmers are not incorporated, then they need to ask the business doing the service for their social security number (SSN)

Moreover, if a farm owner acquired above $600 as rent, then it is mandatory to file 1099 form. Farmers have to talk to their landlords in order to get their 1099 forms.

1099 forms were started by the IRS as a step to fill the tax gap. Most of the income earned by non-employees/freelancers was being unreported and hence resulting in huge tax gap for the government. In order to narrow the gap, Congress came up with the 1099 forms.

For year 2012-2013, a 1099 form has to be sent to the recipient no later than January 31st 2013.

 There are 3 copies of the 1099 form.

·        One is kept by the payer,

·        One is sent to the recipient and

·        The other copy is filed with internal revenue service. 

Businesses are supposed to file the 1099 form with the IRS no later than February 28th 2013. However if you efile 1099 form which obviously is a better choice, then the due date would be April 1st 2013

Electronically filing a 1099 form is a very easy and effortless method as compared to the paper filing method. Nowadays IRS has made it compulsory for businesses who have to file 250 1099 forms to electronically file them. If you fail to do so, then penalties are imposed on you. Also if you are filing less than 250 1099 forms, still you are encouraged to e-file as it is cost effective, quick, and secure and provide IRS confirmation in less time than anticipated.  You can either e-file through the IRS website or make use of an IRS approved e-file provider such as 1099online.com to e-file your 2012 form 1099 efficiently

IRS FORM 1099 REPORTING REQUIREMENTS

The Internal Revenue Service (IRS) requires businesses (including not-for-profit organizations) to issue a Form 1099 to any individual or unincorporated business paid in excess of $600 per calendar year for services rendered. This is required whether these payments are spread out over the course of the year or are paid in one lump sum payment. This form is generally not required to be issued to incorporated businesses. The only exception is when payments are made to incorporated law firms. A 1099 must be issued. whenever payments in excess of $600 per calendar year are made to law firms.

The penalty for failure to file Form 1099 can be as much as 50% of the amount paid for services. The responsibility for filing the Form 1099 is on the organization paying for the services (each state component). It is the responsibility of the individual/business receiving the Form 1099 to handle it properly on their tax return.

  Every year businesses have to prepare a vast number of 1099 forms and provide a copy of each 1099 form to their payees/recipients, so that they can use it for their income tax purposes. Moreover, besides providing a copy to payees, businesses also have to file one copy with the internal revenue services for their record. Considering that businesses have to prepare a huge number of 1099 forms every year, thus IRS has made it compulsory that businesses who have to file 250 and above 1099 forms will have to mandatorily use electronic filing system to file 1099 misc forms. Efiling 1099 forms is actually a quick, easy and secure method to file tax form 1099 misc. Filing deadline for 1099 electronic filing payers is April 1st 2013. Although you can efile 1099 forms on your own, but it would require you to download the software and then efile. However, one such company that has come up with advanced efiling software for 1099 filing is 1099online.com. You can learn more about their efiling offerings and services at 1099online.com.

FORM 1099 MISC COMPLETE GUIDE – 1099 misc forms, form 1099 misc filing requirements, 1099 misc form due dates and penalties.

Now and then, we see someone asking a query on yahoo answers, ask.com and other websites about 1099 misc form. When a person received 1099 misc form, they are surprised and immediately post ‘Why did I receive a 1099 misc form’? Not only that but the search engines and filled with questions regarding 1099 misc forms, 1099 filing requirements, best way to file a 1099 misc form, due dates and penalties for 1099 filing and more. The list of questions is endless.

So here I am today, ready to answer all your doubts and questions about 1099 misc forms.

WHAT IS FORM 1099 MISC?

1099 misc form is used to report certain types of payments made in the course of a trade or business. If you're a small business owner who has hired the services of an independent contractor or freelancer, you may need to file and submit the 1099 misc form to both the Internal Revenue Service and the person or business that you paid. Normally, a 1099 misc form has to be reported if at least $600 has been paid to the recipient.

Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements. Other organizations subject to these reporting requirements include trusts of qualified pension or profit-sharing plans of employers, certain organizations exempt from tax under section 501(c) or (d), farmers' cooperatives that are exempt from tax under section 521, and widely held fixed investment trusts. Payments by federal, state, or local government agencies are also reportable.

IS FORM 1099 MISC VALID FOR EMPLOYEES OF A FIRM?

No, if you are employed by a firm or a registered corporation, then you are not suppose to file form 1099 misc. If you are providing services to a company as an employee and receive 1099 misc form, then it is a mistake on the part of your employer and you must correct it. As an employee, you are supposed to receive form W2 for your income tax purpose.

WHAT DO I DO WITH 1099 MISC FORM AFTER RECEIVING IT?

Because you are an independent business person, working for yourself and are not registered as acorporation, partnership or multi-owner limited liability company and you were professionally hired by a company on a contract basis; you are legible to receive form 1099 misc by January 31st2013. You would need that 1099 misc form to report your income to the IRS for your tax filing purposes.

Now when you get a 1099 misc form, take a look at Box 7, “Nonemployee compensation.” This is where your annual income from the company that hired you will be reported. And this is the income that you must be sure to include on your Schedule C, because not only did the company send you a 1099 misc form but also filed it with IRS. Hence, the 1099-MISC serves the same function for the self-employed as a W-2 does for the employee. It tells you and the IRS how much income you made from one company.

WHAT DO I DO IF THE AMOUNT ON THE 1099 MISC FORM IS INCORRECT?

In such case, you should contact the business who issued the 1099 to resolve the discrepancy. If they made a mistake, they must issue a corrected 1099 to both you and the IRS. To be safe, you should wait until you receive the corrected 1099 before filing your tax return. You need to be sure that the 1099 income amount agrees with your Schedule C income amount. If there is a difference between the total income on your 1099 misc form and the amount of income on your Schedule C, the IRS will eventually catch it and send you a letter demanding an explanation

I FILED MY TAX RETURN BUT AM YET TO RECEIVE MY 1099 MISC FORM?

There is no problem if you filed your tax return and received 1099 misc form after that as long as you reported your income on schedule C. But in, case you did not report your 1099 income, make sure you file an amended tax return. This will surely increase the amount of tax due and probably late payment penalties if you fail to pay your tax dues on time.

WHAT ARE THE PENALTIES FOR 1099 MISC FORM FILING?

The amount of the penalty is based on when you file the correct information return. The penalty is:

1) $30 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small businesses, defined below).

2) $60 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for small businesses).

3) $100 per information return if you file after August 1 or you do not file required information returns; maximum penalty $1,500,000 per year ($500,000 for small businesses).

BY WHEN AM I SUPPOSED TO FILE AND REPORT 1099 MISC WITH THE IRS?

31st January 2013 – send misc 1099 form to the recipient

28th February 2013 – file form 1099 misc with IRS on paper

1st April 2013 – File form 1099 misc with IRS electronically

IF I WANT TO EFILE MY 1099 MISC FORM, HOW DO I SELECT THE SERVICE PROVIDER?

There are many service providers wanting to attract customers to file 1099s on their websites but there are certain requisites to look out for when filing form 1099 misc or any other 1099 forms. Below is the list provided:

1. Efile service provider should be IRS approved -look for IRS logo on the site
2. They should be safe and secure - look for security certificate on their website
3. offer user friendly navigation process to simplify your 1099 filing
4. offer reasonable and cost effective pricing. 
5. have customer support service - phone, email, etc. 

Now, we would recommend 1099online.com, as an efile service provider whom you should opt for to file your 1099 forms online. Not because we are 1099online.com, but because 1099online.com fulfills all the above and many more requisites that you should look out for when opting a 1099 filing service provider. Visit 1099online.com and find out yourself. 1099online.com supports efile for 12 different 1099s

This is a copyrighted© article written by ‘tax master’ who is associates with www.1099online.com. No permission is granted for commercial use. You may reproduce this article with written consent from the TRS Holdings, Inc, parent company of 1099online.com by emailing to wecare@1099online.com or by calling at 800-578-2290

1099 dead line - 1099 filing

The IRS deadline to electronically file your 1099 form is March 31, 2013. As Per IRS regulations any person required to file 250 returns or more must file those returns electronically. Others with less than 250 returns may also choose to electronically file their returns. Filers whom fail to file a correct information return by the deadline may be subject to a penalty. Penalties vary and are based on the date you file your correct return.

The penalties are:

$15 per information return if you correctly file within 30 days; maximum penalty $75,000 per year ($25,000 for small businesses)

$30 per information return if you correctly file more than 30 days after the due date but before August 1; maximum penalty $150,000 per year ($50,000 for small businesses)

$50 per information return if you file after August 1 or you do not file required information returns; maximum penalty $250,000 per year ($100,000 for small businesses)

The 1099-MISC is a form used to report to the IRS income paid to an independent contractor. It is also used to report rent, royalties and a variety of other types of income. For independent contractors who work from home, often in freelancing or consulting, it is commonly used to report nonemployee compensation. It is used to report miscellaneous income, such as income earned as a non-employee, as well as fees, commissions, rents, or royalties paid during the last tax year. Payments for prizes, awards, legal services, and other non-employee activities may be reported on this form as well.

If you want file electronically form 1099 you need not to download any software, it is very simple and easy navigation prepare form online and report to the form to IRS in few minutes. On 1099online.com you just need to enter the information of your business then system automatically generates the form for you to download and give to your payee or contractor,also it sends your information to IRS. Don't struggle with buying forms and forget about the typewriter. Filing 1099-MISC forms is easy, fast and secure with 1099online.com. Easily enter data online and let us electronically file with the IRS, plus download and email or mail your recipient copies