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!
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