Managing a business in this fast paced and chaotic environment in which we operate is no easy task. There are multiple priorities, goals, and deadlines competing for your attention and all of them must be addressed—from sales, account management, and human resources to product/service development and vendor relations. Additional responsibilities, such as your accounting and tax compliance are often left unaddressed until a pending deadline forces management into action. However, it’s important to stay on top of important filing deadlines, including IRS Form 1099-MISC.
IRS Form 1099-MISC is issued to any supplier, vendor, or service provider that the company has paid more than $600 per year for services rendered. To help clients, prospects, and others understand 1099-MISC reporting, Selden Fox has provided a summary of key details below.
Who Receives a Form 1099-MISC?
The form must be filed for each individual who you paid at least $10 in royalties or an individual or business you paid at least $600 for qualifying expenses or services performed by a non-employee This includes rent, services performed by independent contractors, other income, prizes and awards, medical and healthcare payments, or payments to an attorney.
When is the Filing Deadline?
Effective for tax year 2016, the filing deadline for Form 1099-MISC that include non-employee compensation changed to January 31, a full month earlier than in prior years. For tax year 2017, the deadline to electronically file or mail the form for non-employee compensation is on or before January 31, 2018. All other reported payments must be filed on Form 1099-MISC by February 28, 2018.
Preparing the Return
To properly prepare Form 1099-MISC, you should request a Form W9 from each recipient. A W9 provides the recipient’s name, address, SSN, or EIN. Other information necessary to complete the form include the amount paid for the tax year, as well as the filer’s name, EIN, and address. Before filing, carefully review all information provided on the form to ensure it is accurate and free of omissions. In addition to sending copies to the recipients, all Forms 1099-MISC should be filed with Form 1096 and sent to the Department of the Treasury.
The IRS imposes penalties on a company that fails to file information returns on a timely basis. Beyond this, the IRS can impose additional penalties on a company that does not provide all necessary information required or inaccurate information. If a deadline is missed, the IRS assesses penalties based upon a tiered penalty system. If a company correctly files within 30 days of the deadline, they are subjected to a penalty of $50 per form (maximum of $536,000). If a company correctly files after 30 days, the penalties can range from $100 to $260 per form.
Many management teams are surprised to learn about the strict filing and compliance requirements mandated by the IRS. Although it may feel overwhelming to stay compliant with the IRS, plenty of resources are available to you. If you have questions about preparing and submitting the IRS Form 1099-MISC or would like assistance with tax planning, tax preparation, or any other issues, Selden Fox can help. For additional information please call us at 630.954.1400 or click here for contact us.