1099-Misc Filing Requirements and Penalties for 2018

It’s a new year and that means 1099 season is here!  I hope you have been collecting those W-9 forms from people because the IRS is cracking down on 1099 reporting.   

If you don’t have W-9 forms signed and filled out, I suggest you start working on collecting those NOW...otherwise be prepared for possible penalties this year.

What’s New

Beginning last year, the IRS changed the deadline for filing government copies of 1099-Misc forms to January 31^st.  In case you weren’t aware the OLD deadline for most was February 28^th (March 31^st if filing electronically).  That means 1099 preparers have one to two less months to get the information required to prepare these forms this year.

The IRS has always required the filing of 1099-Misc forms and there have always been penalties for not filing and filing late.  What’s new is that beginning last year the IRS started enforcing those penalties.  A few of our clients who self-prepare their 1099’s received large penalties for late filing last year; most were not able to get those waived.

Here are the penalty tables pulled from the IRS website:

Large Businesses with Gross Receipts of More Than $5 Million:

Time returns filed/furnished	Returns due 01-01-17 through 12-31-2017	Returns due 01-01-18 through 12-31-2018
Not more than 30 days late (by March 30 if the due date is February 28)	$50 per return/ $532,000 maximum	$50 per return/ $536,000 maximum
31 days late – August 1	$100 per return/ $1,596,500 maximum	$100 per return/ $1,609,500 maximum
After August 1 or Not at All	$260 per return/ $3,193,000 maximum	$260 per return/ $3,218,500 maximum
Intentional Disregard	$530 per return/ No limitation	$530 per return/ No limitation

Small Business with Gross Receipts of $5 Million or Less:

Time returns filed/furnished	Returns due 01-01-17 through 12-31-2017	Returns due 01-01-18  through 12-31-2018
Not more than 30 days late (by March 30 if the due date is February 28)	$50 per return/ $186,000 maximum	$50 per return/ $187,500 maximum
31 days late – August 1	$100 per return/ $532,000 maximum	$100 per return/ $536,000 maximum
After August 1 or Not at All	$260 per return/ $1,064,000 maximum	$260 per return/ $1,072,500 maximum
Intentional Disregard	$530 per return/ No limitation	$530 per return/ No limitation

As you can see the penalties increase the later the filing.

I also want to point out that the “per return” refers to each individual 1099 form.  It does not refer to all 1099 and 1096 forms as a bundle. 

So, this means if you have 5 people you should send 1099’s to and you don’t then your penalty will be at least $530 (per return) times 5 = $2,650.  Not to mention your 1096 form would be filed incorrectly and the list goes on.  And those are the kind of penalties we are seeing assessed.    

Watch Out for These Errors

The IRS says that penalties may apply if you:

• Don’t file a correct information return by the due date and a reasonable cause is not shown
• File on paper when you were required to file electronically
• Don’t report a Taxpayer Identification Number (TIN)
• Report an incorrect TIN; or
• Don’t file paper forms that are machine readable

Who should I issue a 1099-MISC form to?

You should issue a 1099 to any person or unincorporated business (including an LLC not being taxed as a corporation) that you paid $600 or more cumulative during the year for services (including parts and materials and rents).

Payments for purchases of items you consume during the course of your business such as office expenses, utilities, inventory, equipment purchases, etc. are not subject to the 1099 reporting.  Just focus on services provided (i.e. contract labor, commissions paid, etc.).

You do not need to include payments made by credit card since these amounts are picked up on Forms 1099-K.

This information is readily available if you have your accounting caught up through December 2017.  If not you have some work to do. 

Do I need to get a W-9 from the vendor?

I get this question a lot.  The short answer is no you don’t but you want to because this is your get out of jail free card if the IRS sends you a notice that the TIN or other information on the return is incorrect.  As long as you have the W9 to support the information you filed on the 1099 you can respond to the IRS and avoid penalties.

Where can I get help?

We are here to help if you need us.   Call our office 417-882-9000 and ask for Kayla Kendrick.   We will need your W9's and a signed engagement letter.