Are You Form 1099-MISC Compliant for 2019? If Not, The IRS Is Watching
With the end of the year approaching, now is a good time to be sure you have everything you need to complete your year-end filing requirements. Key documents, such as the Form 1099-MISC, need to be submitted to the IRS and recipients by January 31, 2020.
Form 1099-MISC reporting is required for payments of more than $600 to individual and business entities who are working as independent contractors and are not employees of the business. If you made payments such as rent, payments to independent contractors, prizes and awards, payments for professional services such as legal and accounting, or similar payments, you most likely will be subject to filing Form 1099-MISC.
All Forms 1099-MISC are required to be filed with the IRS and recipient by January 31, 2020.
The IRS requires taxpayers to state whether they were required to file (and whether they did, indeed, file) Forms 1099-MISC on their tax return. Failure to file Forms 1099-MISC could result in substantial penalties. Penalties are the greater of $550 per form or 10% of the amount required to be reported. The IRS considers this “Intentional Disregard,” in which there is no maximum penalty limitation. You could also face other penalties for late filing of the Forms 1099-MISC.
If a filer submits a Form 1099-MISC with a missing or invalid TIN, the filer will receive a notice from the IRS stating that a proper TIN should be secured. If not, backup withholding will be required on all future payments until a signed Form W-9 is secure.
Please be aware that the IRS has allocated more resources to crack down on “Intentional Disregard” and incorrect filing of Forms 1099-MISC.
An individual or business entity that is required to file an information return, such as a 1099, with the IRS must obtain the correct taxpayer identification number (TIN) of the recipient. The TIN could be a Social Security Number (SSN), Employer Identification Number (EIN) or another IRS-approved identification number.
Obtaining a signed Form W-9 from the recipient of the Form 1099 certifies that the TIN provided is correct, and the 1099 recipient is not subject to backup withholding.
If reporting thresholds are not met, individuals or business entities are subject to backup withholding and must withhold 24% of non-employee compensation. Individuals and business entities will not be subject to backup withholding on payments made if they obtain the payee’s correct TIN, and the payee makes the proper certifications via the Form W-9.
It is important to obtain a signed W-9 from all independent contractors to ensure you avoid penalties and backup withholding requirements.
Please click here for a fillable PDF of Form W-9. Please request that all non-employees receiving payments of more than $600 from you fill out, sign and return the attached W-9 to you in a timely manner.
If you have questions regarding your reporting requirements, please contact your Ericksen Krentel tax professional at 504-486-7275 or firstname.lastname@example.org as soon as possible.
Staff Accountant Zack Tassin contributed to this article.
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