The IRS has become more strict with 1099 filings by assessing harsher penalties. The penalties associated with missing the deadline or not filing 1099s can range from $30 to $100 per form, with a maximum fine of $500,000 per year. If the IRS determines there is intentional disregard of the requirements, the penalty can reach as high as $250 per form, with no maximum. For the 2016 calendar year, 1099s are due on January 31, 2017.
IRS Form 1099-MISC summarizes income from all non-employee compensation. You must send out a Form 1099-MISC to all contractors you have hired and paid $600 or more during the year; this includes any partnerships or LLCs you may have contracted throughout the year. Note: Form 1099 is not required to be issued to Corporations (“Inc. or Corp”). However, a Form 1099 must be issued to all lawyers and law firms you have hired, regardless if they are incorporated.
Federal Form 1099-MISC must be issued under the following conditions:
- If you paid at least $600 in:
- Services performed by someone who is not your employee;
- Attorney and legal fees;
- Prizes and awards;
- Other income including punitive damages and deceased employee’s wages;
- You paid at least $10 in royalties, broker payments in lieu of dividends or tax-exempt interest;
- Direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment;
- Director’s fees and other remuneration, including payments made after retirement;
- You withheld any federal income tax under the backup withholding rules regardless of the amount.
In order to ensure a timely filing of Form 1099, we will need complete information as soon as possible. If you haven’t done so yet, please obtain a completed Form W-9 (Request for Taxpayer Identification Number) from each independent contractor who received payments of $600 or more during the current year.
Additional information that is needed to prepare Form 1099-MISC is the dollar amount paid in 2016 and the state in which the service was performed. Typically, this is the home state of the payer; however, if services were received in various states, please specify the state for tax filing purposes.
RotenbergMeril is a CPA firm with offices in the NY/NJ Metropolitan Area. According to both the NJBiz Journal and New Jersey Business Magazine, we are ranked as one of the top accounting firms based in Northern New Jersey, servicing clients across the USA and worldwide. The firm is PCAOB registered and a member of both the Center for Public Company Audit Firms, the Employee Benefit Plan Audit Quality Center, and the Forensic Valuation Services (FVS) section of the American Institute of Certified Public Accountants. RotenbergMeril has a dedicated Litigation Support and Valuation Services Group.