What are the scenarios that lead to 1099 penalties?
The IRS will impose 1099 penalties when you meet the following conditions:
- Fail to file by the deadline
- Fail to include all the required information to complete your 1099 Forms
- File with incorrect information
- File with paper forms when you’re required to e-file
- File paper 1099 Forms that are not machine-readable
What are the penalties for failing to file 1099 forms?
If you’re late filing your 1099 forms, or neglect to file them, you may have to pay an IRS penalty. The amount you pay is determined by when you file:
- $50/form if you file correctly within 30 days of your deadline; max. penalty $556,500 ($194,500 for small businesses).
- $110/form if you file after 30 days but before August 1; max. penalty $1,637,500 ($556,500 for small businesses).
- $270/form if you file after August 1 or not at all; max. penalty $3,339,000 ($1,113,000 for small businesses).
- Keep in mind that these penalties can be applied to recipient copies of Form 1099 as well as IRS copies.
Is there any separate penalty for Form 1099 corrections?
If you’re required to file a Form 1099 correction and fail to do so, you may be subject to the same penalties as Form 1099 late filers. Unless you can show reasonable cause for your missing or incorrect 1099 correction, you could be fined for filing it late, failing to include all necessary information, or for paper filing when you were required to e-file. And if you’re not required to e-file, make sure your paper forms are machine readable, otherwise you could face a fine as well.