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Review important requirements for employee filing.
Understand Your 1099 State Reporting Requirements
1. Your state participates in the Combined Federal/State Filing (CF/SF) program.
Most states participate in this program, which is a major convenience for employers. Under this program, the IRS shares 1099* data with the appropriate states — automatically. That way, you’re saved the extra step of state filing.
These are the states that participate in the CF/SF program: AL, AR, AZ, CA, CO, CT, DE, GA, HI, ID, IN, KS, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NJ, NM, NC, ND, OH, OK, SC, WI.
NOTE: Participation does not mean that the state may not still require you to file directly.
2. Your state doesn’t participate in the CF/SF program, so you must file directly.
If a state isn’t part of the combined program and the state requires you to submit the form, then it’s your responsibility to file the 1099-MISC directly with that state. It’s two separate returns and two separate processes.
These states require direct filing: IA, Il, KY, NY, OR, PA, RI, UT, VA, WV, VT, DC.
3. Your state doesn’t have a state income tax, so you only have to file federal returns:
If you’re an employer filing in one of these states, you’re required to report 1099* data with the federal government only.
These states are: AK, FL, NV, NH, SD, TN, TX, WA, WY.
*This information refers to these forms that are available for e-filing:
Protect Your Business from Hefty Filing Penalties
It pays to mind the tax-filing deadlines, too. Late filing of mandatory 1099s could lead to penalties ranging from $50 to $100 per 1099, with a maximum of $547,000 a year for your small business*. The amount of the penalty is based on when you file the correct information return, as follows:
- $50 per 1099, if you file within 30 days of due date; maximum penalty of $191,000
- $100 per 1099, if you file more than 30 days after the due date but by August 1; maximum penalty of $547,000
- $270 per 1099, if you file after August 1; maximum penalty of $1,091,500
Penalties for not filing correct information returns apply if you:
- Don’t file a correct information return by the due date and a reasonable cause isn’t given
- File on paper if you’re required to file electronically
- Don’t report a Taxpayer Identification Number (TIN)
- Report an incorrect TIN
- Don’t file paper forms that are machine-readable
Penalties for not furnishing correct payee statements apply if you:
- Don’t provide a correct payee copy by the due date and a reasonable cause isn’t given
- Don’t show all required information on the statement
- Provide incorrect information on the statement
Keep in mind that the penalty to file a correct information return is separate from the penalty for not furnishing the correct payee statement. Because of this, you could incur two separate penalties.
*In all cases, the IRS considers you to be a small business if you’ve earned an average of $5 million or less in annual revenue for the past three tax years.