Think it's no big deal to skip 1099 filing for a few of the independent contractors you worked with this year? Not so fast!
As the IRS continues to enforce 1099 compliance by small businesses, the risk of not filling out those forms is too great. In fact, the IRS now asks you to answer these two questions on all federal income tax returns:
By responding to these questions, you are indicating (under penalty of perjury) that your tax return is accurate and complete — including 1099 filing.
Specifically, not providing a correct statement (intentional disregard) carries a penalty of $550 per 1099, with no maximum for the year.
It pays to mind the tax-filing deadlines, too. Late filing of mandatory 1099s could lead to penalties ranging from $50 to $270 per 1099, with a maximum of $1,113,000 a year for your small business. The amount of the penalty is based on when you file the correct information return, as follows:
Regarding the maximum penalties, the IRS considers you to be a small business if you made $5 million or less in average annual revenues for the previous three tax years.