When 1099s Must Be Filed

If you use independent contractors to perform services for your trade or business and you pay them $600 or more for the year, you are required to issue them a Form 1099 at the end of the year to avoid facing significant penalties and the loss of the deduction for their labor and expenses. It is not uncommon to use the services of a repairman early in the year, pay him less than $600, then use his services again later and have the total for the year exceed the $600 limit. As a result, you may have overlooked getting the information needed to file the 1099s for the year (service providers name, address and tax ID number). Therefore, it is good practice to always have individuals who are not incorporated complete and sign the IRS Form W-9 the first time you use their services. Having a properly completed and signed Form W-9 for all independent contractors and service providers eliminates any oversights and protects you against IRS penalties and conflicts.

IRS Form W-9, Request for Taxpayer Identification Number and Certification, is provided by the government as a means for you to obtain the data required to file the 1099s from your vendors. It also provides you with verification that you complied with the law should the vendor provide you with incorrect information. We highly recommend that you have a potential vendor complete the Form W-9 prior to engaging in business with them. The form, available from this site, can either be printed out or filled onscreen and then printed out. The W-9 is for your use only and is not submitted to the IRS.

In order to avoid a penalty, copies of the 1099-MISCs must be sent to the recipient and filed with the IRS by January 31.  Other types of 1099s need to be the recipients by January 31 and filed with the IRS by February 28 (February 29 in a leap year). They must be submitted electronically or on optically scannable forms (OCR forms). This firm prepares 1099s in OCR format for submission to the IRS with the 1096 submittal form. This service provides recipient copies and file copies for your records. Copies to recipients must be sent by the last day of January to avoid a penalty. Use the worksheet to provide us with the information we need to prepare your 1099s. Note: If the due date falls on a Saturday, Sunday or legal holiday, the due date is the next business day.

The penalties for failure to file the required information returns are $260 for each informational return, up to a maximum of $3,193,000 ($1,064,000 for small businesses).  The amounts shown are for 2016 filings and are annually adjusted for inflation.

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