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1099 Information

We have compiled a list of information regarding the new requirements for 1099 Forms. Please review the topics below to ensure you're satisfying your requirements.

As always, please contact us if you have any further questions.​

 

 

Penalties:

 

Who Should file a 1099?

                                        Form 1099-DIV    To be filed if you are a payer of $10 or more of dividends;

Form 1099-INT     To be filed if you are a payer of $10 or more of interest ($600 or more in some                                        cases);

Form 1099-R         To be filed if you are a payer of distributions from pensions, annuities, retirement                                     or profit sharing plans, IRA’s, insurance contracts, etc.; for distributions of $10                                         or more.

Form 1099-S          To be filed for real estate transactions $600 or more that closed in 2016.

Form 1099-MISC    Which is the information return used to report payments that are not wages. This                                    requirement sometimes causes confusion.  Please see the following, for a more                                      complete explanation.

 

 

Penalties Applicable to Information Return (1099) Filers

The Form 1099 instructions require payers to follow certain rules when preparing and submitting the forms. These rules are summarized in Table T304. If the payer discovers an error was made on a form already filed, the error should be corrected as soon as possible.

Failure to File Correct Information Return 

 Failure to file a correct Form 1099 by the due date, without reasonable cause, may subject a payer to a penalty under IRC Sec. 6721. The penalty applies for failure to file timely, failure to include all information required to be shown on a return, or failure to report correct information on a return. The penalty also applies if forms are filed on paper when electronic filing is required, an incorrect or no TIN is reported, or paper forms are not machine readable. 

Failure to Furnish Correct Payee Statements

Failure to provide correct payee statements, without reasonable cause, may subject a payer to a penalty under IRC Sec. 6722. The penalty applies for failure to provide Form 1099 by January 31 (or February 15 for Forms 1099-B, Forms 1099-S, and certain Forms 1099-MISC), failure to include all information required to be shown on a return, or failure to report correct information on a return. 

The penalties under IRC Secs. 6721 and 6722 do not apply to Forms 1099-SA, Forms 1099-Q, Forms 1099-QA, or Forms 5498, 5498-ESA, and 5498-SA. The penalty for failure to timely file these forms is $50 per return with no maximum, unless the failure is due to reasonable cause (see IRC Sec. 6693).

 

Summary of Employment Tax Penalties

Type of Filing Failure Penalty

Failure to file required employment tax return

 [IRC Sec. 6651(a)(1)]

 5.0% of amount required to be shown on return per month or fraction of a month to maximum 25%. Minimum penalty if over 60 days late is lesser of $135 or the amount of tax due.

Failure to pay amount shown as tax on return

 [IRC Sec. 6651(a)(2)]

0.5% of amount required to be shown on return per month or fraction of a month to maximum 25%.

Both failure to timely file and failure to timely pay [IRC Sec. 6651(c)]

 When both penalties apply for the month, the failure to file penalty is assessed at 4.5%.

Failure to file required employment tax return (fraudulent) [IRC Sec. 6651(f)]

15% of amount required to be shown on return per month or fraction of a month to maximum 75%.

Failure to pay deficiency within 21 calendar days (10 business days if the amount demanded is $100,000 or more) of notice and demand [IRC Sec. 6651(a)(3)]

0.5% of amount required to be shown on return per month or fraction of a month to maximum 25%.

Failure to pay deficiency within 10 days of notice of levy [IRC Sec. 6651(d)]

1.0% of amount required to be shown on return per month or fraction of a month to maximum 25%.

Failure to file information returns not covered under other sections [IRC Sec. 6652(b)]

Imposes a penalty for tip income unreported to the employer of 50% of the employee FICA tax on the unreported tip income-see Key Issues 16B and 29A.

Failure to timely make required deposit [IRC Sec. 6656(a)]

2.0% of underpayment up to five days late.

 

5.0% of underpayment if six to 15 days late.

 

10% of underpayment if over 15 days late but within 10 days of first delinquency notice.

 

15% of underpayment if more than 10 days after delinquency notice or on date notice and demand received, whichever earlier.
Penalty for bad check, money order, electronic funds transfers, etc. (IRC Sec. 6657) 2% of the amount of a payment instrument that is $1,250 or more. If the payment instrument is less than $1,250, the penalty is the lesser of $25 or the amount of the instrument.
Accuracy-related penalty [IRC Sec. 6662(a)]

20% of substantial understatements of income tax, or the portion of any underpayment attributable to negligence or disregard of rules or regulations.

Preparer penalties [IRC Secs. 6694(a)(1) and (b)(1)]

The greater of $1,000 or 50% of the income derived (or to be derived) from preparing the return if (1) any part of an understatement of tax liability is due to an unreasonable position, (2) the preparer knew or reasonably should have known of such a position, and (3) the preparer did not disclose the position or disclosed it but did not have a reasonable basis for the position. A second-tier penalty of the greater of $5,000 or 50% of the income derived (or to be derived) from preparing the return applies if the understatement of tax liability was due to a willful attempt to understate the liability or there was reckless or intentional disregard of rules or regulations.

Preparer penalities [IRC Secs. 6695(a), (b), and (c)]

$50/return to maximum of $25,500/year for (1) failure to provide a copy of the return to the taxpayer, (2) failure to sign the return or refund claim, or (3) failure to furnish identifying number. 

Failure to timely file accurate information return

 [IRC Sec. 6721(a)]

$50/statement if corrected within 30 days of filing date to maximum $532,000/year ($186,000/year if "gross receipts test" is met). 

$100/statement if corrected after 30 days but on or before Aug. 1 to maximum $1,596,000/year ($532,000/year if "gross receipts test" is met). 

$260/statement if not corrected by Aug. 1 to maximum $3,193,000/year ($1,064,000/year if "gross receipts test" is met). 

If the failure is willful, the greater of $530/statement or 10% of amount required to be shown on statement (no maximum). 

Trust Fund Recovery Penalty [IRC Sec. 6672(a)]

In case of attempt to evade or defeat tax, personal liability equal to 100% of amount of tax evaded or not collected or accounted for and paid over-see Key Issue 30C.