Penalties for Missing the 1099-NEC or 1099-MISC Deadline

Tax

Businesses need to report payments to independent contractors and non-incorporated businesses on Form 1099-NEC if those payments totaled $600 or more during 2021. These payments may represent fees, commissions, prizes, awards, or other forms of compensation for services performed for your business.

You don’t need to file Form 1099-NEC for:

  • Payments made for services performed for you personally (only businesses must file Forms 1099-NEC)

  • Payments for physical products or goods rather than services

  • Payments made to businesses organized as a C corporation or S corporation

You do need to file Form 1099-NEC for payments made to most LLC’s. If you’re not sure whether a vendor is a C corporation or S corporation, check the W-9 form provided by your vendor. (It’s best practice to always request a Form W-9 before working with a new vendor. Consider requesting an updated W-9 from each of your vendors annually.)

Businesses also need to issue Form 1099-MISC for each person or non-incorporated entity to whom the business has paid at least $10 in royalties or $600 for items such as rent and medical or health care services, or attorney services.

Form 1099-NEC must be filed by January 31 of the following year whether you file on paper or electronically. The business owner must send all copies of Form 1099-NEC Copy A to the IRS and send Copy B and Copy 2 to any nonemployees for whom a form was completed by that date. Form 1099-MISC must be filed by March 1 if you file on paper or March 31 if you file electronically.

If a business fails to issue a 1099 form by the deadline, the penalty varies between $50 to $270 per form depending on how long past the deadline the business issues the form. If a business intentionally disregards the requirement, it is subject to a minimum penalty of $550 per form or 10% of the income reported on the form, with no maximum.

Need assistance with preparing and filing Forms 1099? Received a Form 1099 you need to include on your tax return? Schreiber Accounting and Advisory can help with tax preparation and planning services. Contact the firm for more information.

Material discussed is for informational purposes only. It is not to be interpreted as investment, tax, or legal advice. Individual situations vary, and this information should only be relied upon when coordinated with individual professional advice.

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