NOTICE REGARDING THIS YEAR’S 1099’S:
The IRS in its infinite wisdom, this year, decided that 1099-MISC with Box 7 reporting on them, must be filed by January 31, 2017. This means that anyone required to file for subcontractors (typically), must have their 1099-MISC done by January 31, 2017 for both the vendors AND the IRS.
In the days when the IRS made sense, you had until February 28, 2017 to get the 1099-MISC to the IRS which meant you had an additional month to make sure that everything and everyone was properly accounted for. Many times I had to redo a 1099-MISC because the client didn’t get the right address or the amounts were wrong. Now you don’t.
Penalties for not issuing Form 1099-MISC
People and companies that make payments of miscellaneous income to individuals must give the payee Form 1099-MISC by the end (in most cases) of February of the year following the tax year in which the income was paid. However, if the payment is for non-employee compensation to be shown in box 7 of Form 1099-MISC, then it is required to be filed by January 31st. For example, if you received miscellaneous income in 2016 that is non-employee compensation, the paying institution or individual must issue Form 1099-MISC by January 31, 2017. If the institution fails to do so, the penalty against the company varies from $30 to $100 per form ($500,000 maximum per year), depending on how long past the deadline the company issues the form. If a company intentionally disregards the requirement to provide a correct payee statement, it is subject to a minimum penalty of $250 per statement, with no maximum.
Penalties for not reporting Form 1099-MISC
If you receive a Form 1099-MISC that reports your miscellaneous income and you don’t include the income on your tax return, you may also be subject to a penalty. Failing to report income may cause your return to understate your tax liability. If this occurs, the IRS may impose an accuracy-related penalty that is equal to 20 percent of your underpayment. As an example, if the failure to include your miscellaneous income caused you to understate your tax liability by $500, your penalty would be $100 ($500 x .20 = $100).