New form 1099 filing due dates and penalties for year 2011-2012

In less than a week, businesses would have to gear up to file their 1099 forms. 1099 forms were basically started by the government as an effort to curb the tax gaps that are taken place. The reason why tax gap had occurred was because of the income earned by non employees/freelancers and thus was gone unreported to the government. Hence 1099 forms were designed so that any payments of $600 and above made to independent contractors was reported on 1099 forms and thus filed with the IRS for the income tax purposes.

It is very necessary that 1099 forms are filed correctly and on time. If both these conditions are not met, then one can face huge penalties. The new penalties for 2011 form 1099 for year 2012 are as under:

If you fail to file a correct 1099 form by the due date, and cannot show reasonable cause, you may be subject to a penalty that broadly falls under categories listed below:

• —        Failing to file by the due date and you don’t furnish reasonable cause to justify the delay
• —       Failing to file paper forms that are machine readable
• — Failing to include all required information
• —       Failing to meet electronic filing requirements
• —       Failing to include information that is correct
• —       Or failing to report TIN or reporting an incorrect TIN

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

—    $30 per 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 form 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.

DUE DATES TO FILE 1099 FORM:

1. —        January 30^th 2012- Due date to provide 1099 form to recipient
2. —        February 28^th 2012 – due date to paper file 1099 form
3. —        April 2^nd 2012- Due date to electronically file 1099 form