Monthly Archives: May 2013

1099 Penalties – What You Need To Know And How To Avoid Them

1099 forms are becoming the method of payment for a growing number of people acting as independent contractors and small businesses. Any company or individual with whom you do over $600 must be issued a 1099. This includes payments for rent or any service a contractor, consultant or expert provides.

Professional fees are included in this requirement. These would include doctors, lawyers or other professionals. Payments to corporations are excluded only if they are not involved in supplying you with medical and health care, legal services or fishing activities.

These forms must legally be filed whether or not you are going to declare the money as expenses, and the forms must be filed if you are a business or a nonprofit organization.

Typically, form 1099s must be filed in the last week of February, and if filing electronically about 30 days later. In 2013, the current year, the exact dates are February 28 if filing by paper and April 1 2013 if filing electronically.

If you are filing over 250 1099s, the federal government requires that they be filed electronically. Extensions can be easily obtained using form 8809. You can file it in paper form or over the internet, but if you have more than 10 1099s that you are extending you must file this form electronically.

The extensions must be posted before the regular due date, and extend the period by 30 days. There is recourse if you have lost the information through no fault of your own, such as fire or flood, but you will have to be able to prove how you lost the information.

The penalties can quickly become a major liability to businesses, and can occur for one of two reasons.

The first occurs when you are filing the forms after the due date, or after the extended due date. If it is less than 30 days past due, the penalty is $30/form that it is late, with a maximum penalty of $250,000 ($75,000 for small business).

The rate climbs to $60/form if it is more than 30 days late but is filed before August 1st.

The last and highest rate includes anything filed after the 1st of August, and assigns a $100 penalty per form. The cap on total penalties at the highest end is $1.5 million, and $500,000 for small businesses.

1099 penalties can quickly accumulate. If you enter incorrect information on the 1099 forms, the highest penalty level will be used of $100/form, but if you intentionally disregard the filing requirements or intentionally enter false information the penalties start at $250/1099 form, with no maximum limit.

Online file taxes can easily guide you through the 1099 process, and make sure that you are using the correct 1099 forms. In almost all cases that will be the 1099-MISC, but there are some specialty applications that call for other 1099 forms, such as the 1099-INT, the 1099-B and others.

Keep good records, and there is no need to worry about your 1099s – and Online File Taxes is here to help when you need it!

When Is My 1099 Due, And What Can I Do If I’m Not Ready?

1099’s are becoming more and more popular with businesses and individuals as the employment norms continue to shift, but some things must be kept in mind – and now is just the time to be keeping them in mind!

1099s are the easiest way to keep track of how much you paid individuals or small businesses and are essential if you plan on claiming the money spent as an expense.

Typically, 1099 forms have to be filed in the final week of February – that is if the filing is by paper. If filing electronically the deadline is typically 30 days later. In 213, the deadlines are February 28 if filing by paper and April 1 2013 if filing electronically.

If you are not quite ready yet (there can be a lot of reasons small businesses get behind on their paperwork) the government has actually streamlined the procedure. You just need to file a Form 8809, electronically or by paper, before the due date on the 1099 would have been. This will give you a 30 day extension. There is another 30 day extension available for hardship causes, but it is not easy to get.

The first one is automatically granted as long as the Form 8809 is filled out and mailed before the due date on the 1099s.

You must also be careful of how you send them – other than the post office, the only recognized carriers are the big three.

DHL Express (Same Day Service option only), FedEx (multiple services available) and UPS (also multiple services available). No other carrier can be used to send the forms in.

Also, if you have over 250 forms you must file the forms electronically.

The penalties for late filing can add up rather quickly, starting at $30/form and increasing to $100/form for all forms filed after August 1, 2013 or not filed at all.

There is also an intermediate step, $60/form, which is used if the form is more than thirty days late but is filed prior to August 1 2013. The important thing to remember is that it is not too late to file an extension or the forms, especially if you are filing them electronically. In fact, it is almost worth it to file electronically because of the automatic extension built into the system.

1099 forms are the payment method of choice for contractors, and any other business that you do more than $600 with. The 1099-MISC is the 1099 most widely used and when someone says 1099 that is the one that they mean by default.

There are other 1099 designations but they are for very specialized circumstances which do not normally occur.

It is very important to keep close track of your 1099 usage, and it is best to have multiple backups. The IRS does make exceptions for circumstances beyond your control, but it is always better to have this information in at least 2 places.

Now you have a good idea of the basic schedule that 1099 forms work on – there is still time to file, and if you are not ready yet you can file an extension online. We can help you with every aspect of 1099 filing and preparation!