Forms 1099 due January 31 – deadline quickly

By Dustin Wielenga, CPA

*Note that there are some updates to the filing that applies starting for the 2020 tax year forms. These details are listed below

Many companies, as well as individuals with business activities, are required to file Forms 1099. This includes self-employed individuals, or individuals with rental properties. The filing deadline is as early as January 31 of each year, so it is important to act quickly.

What is Form 1099?

There are a couple of different Forms 1099. They are used to report payments made by a business to another taxpayer. The most common are Form 1099-INT (reporting interest), Form 1099-DIV (reporting dividends), and Form 1099-MISC (reporting rents and other income items). Refer to the 1099 instructions “General Instructions for Certain Information Returns” for a more detailed listing of what is reportable. The forms are to be completed on a calendar year basis.

Below is a list of some of the most common types of payments reported on Form 1099-MISC. The list is not all-inclusive, but should give you an idea of what is required.

  • Attorney fees exceeding $600
  • Certain rents exceeding $600
  • Prizes and awards exceeding $600
  • Royalties exceeding $10

There is also 1099 reporting required for:

  • Interest on a business debt to someone (1099-INT)
  • Dividends or other distributions to a C – Corporation shareholder (1099-DIV)

What is new for the 2020 tax year?

The CARES Act accelerated the due date for filing Form 1099 that includes nonemployee compensation (NEC) from February 28 to January 31 and eliminated the automatic 30-day extension for forms that include NEC. As a result, the IRS designed a new form, the Form 1099-NEC which is to be used to report nonemployee compensation. The Form 1099-MISC has been revised to account for this reporting change.

When are the deadlines?

The Form 1099-NEC is to be filed annually by January 31 (by February 1, 2021 for the 2020 filing since the 31st does not fall on a business day). The Form 1099-MISC is to be filed annually by February 28 if you file on paper or by March 31 if you file electronically.

However, a copy of the Form 1099 must generally be provided to the payment recipient by January 31. Therefore, targeting a January 31st completion date is often a best-practice.

Penalties

The late filing penalty generally ranges from $50 to $500 per form. If a taxpayer has many forms required to be filed, then the total penalty can be hefty. Intentional disregard for the filing requirements can attract onerous penalty exposure. Additionally, taxpayers need to certify on their tax return whether they complied with the 1099 filing requirements. These tax returns are to be signed under penalty of perjury, so it is important for taxpayers to comply.

Filing with state governments

Normally the IRS would send the forms to the appropriate state taxing departments. Due to the new nature of the Form 1099-NEC, the IRS does not include it in its combined State and Federal filing program. Each state has its own rules regarding whether they require the Form 1099-NEC filed with them. Therefore, you would need to research the state filing requirements and determine if you need to file with them.

What should I do?

In order to complete any required Forms 1099, you will need to obtain a Form W-9 from the payment recipient. You will want to track down this information as soon as possible so that you can timely file any Forms 1099.

Many taxpayers take care of filing their own Forms 1099. If you have any questions about whether you should be filing any Forms 1099, or if you would like us to assist you with the filings, please contact us as soon as possible. The deadlines are rapidly approaching.

*Post updated January 11, 2021 for new rules

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