Form 1099-NEC and W-2 Late Filing Penalties

What You Need to Know About Potential Penalties

Think it's no big deal to skip 1099-NEC filing for a few independent contractors – or push out W-2 filing for your employees? That could be a costly oversight! As the IRS steps up enforcement of 1099 and W-2 compliance by small businesses, the risk of mishandling these forms rises.

Why Delayed or Incomplete Filing Is Not Worth the Risk

If you fail to file a correct 1099 or W-2 by the due date — and cannot show reasonable cause — you may be subject to a penalty under section 6721.

Specifically, a penalty may apply if you:

  • Fail to file on time
  • Don’t provide all required information
  • Include incorrect information
  • Fail to report a TIN (or report an incorrect TIN)
  • File paper forms that are not machine readable
  • File paper forms when you are required to e-file

The amount of the penalty, indexed for inflation, is based on the lateness of the form. It’s also imposed per form. For small business filings due after December 31, 2022:

Form Tax Year Up to 30 Days Late 31 Days Late Through August 1 After August 1 or Not Filed Intentional Disregard
1099 & W-2 2022 $50
Maximum penalty of $206,000
Maximum penalty of $588,500
Maximum penalty of $1,177,500
No Maximum

Regarding the maximum penalties listed above, the IRS considers you to be a small business if your average annual gross receipts for the three most recent tax years (or period in business, if shorter) ending before the calendar year the forms are due are $5 million or less. Be aware, too, that under section 6722, the penalty amounts can double if you fail to provide correct payee statements and you cannot show reasonable cause. To avoid penalties for reasonable cause, you must prove that the failure was due to an event beyond your control or “significant mitigating factors.”

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