New IRS Penalties for 1099s

June 18, 2011


Now that we defeated the section of the Obama Health Care Bill that required everyone to file a 1099 on everyone else, personal and business, for goods and services, there is a another law that was slipped elsewhere into the Bill that was not removed.This has to do with the penalties for not sending a 1099 form when it is required.

The penalty starting next year, 2012, is up to $150.00 per 1099 form for not sending it to the IRS “in a timely manner” and another $150.00 per 1099 for not sending it to the person who is supposed to receive one “in a timely manner”. Thus, if you do not send one in at all, it carries a $300.00 fine (per 1099).

All 1099s must be sent to the recipients by Jan 31 of the year after the money was paid out. Jan 31, 2012 for 2011 tax year.All 1099s must be filed with the IRS by Feb 28 of the year after the money was paid out. Feb 28, 2012 for 2011 tax year. All 1099s must have a 1096 transmittal form accompany it to the IRS.Many states require a copy of the 1099s and sometimes, the 1096.

There are 1099s numbered A, B, C, DIV, G, H, INT, MISC (for labor), OIC and 1098 (mortgage interest, especially if you have a land contract) and there are others.Who should file a 1099 INT? That form is filed by the person or business who pays interest on a loan. Think about that one. The bank sends you one because they pay you interest. If you lend a relative money and that person pays you interest, then they have to send you a 1099 INT if they paid $10.00 of more in interest during the year.Who should file form 1099 MISC? Everyone who pays money to a person or a non-corporate business for services rendered.

The cut off is simple. Once you pay $600.00 or more in a year, you have to file a 1099 MISC. Bartered labor is included in this one.Who should you send a 1099 MISC to? Lawyer, accountant, surveyor, lawn maintenance, snow removal, dentist, doctor, laborer, landscaper, builder, plumber, car mechanic, landlord, chiropractor, anyone who is not incorporated and who provided a service to you or your family or your business.Not your butcher, plant supplier, office supply provider, or grocer because they are selling you goods. Only services are included in this law.

The law we defeated would have included all that I have excluded in this letter.

NOW, there is another glitch. You cannot get 1099s and 1096 forms off the internet or from the post office. They can only be found at a few places. One is at the IRS website and they will MAIL them you. You can get them at the office supply store for a hefty fee. You can ask a professional such as myself and see if we have any extra.  I will be ordering thousands of extra forms this year because of the enormity of this law.

The Health Care Bill needed a way to pay for itself and this is one of the ways the federal government plans to bring in an awful lot of money.

It is a fact that the IRS does not make these forms easily accessable. We already find this with other business forms and tax forms where the IRS says order them from them off the internet or ask a professional accountant to supply forms.

What we see coming is the requirement to electronically file the 1099s. I predict we are only a couple of years away from that experiment. With the Everify system for employers to use for W2 employees, this will be the next step. They want a paperless sytem which I find difficult to manage when I do IRS audits and they DEMAND copies of all tax related documents.No easy answers for us. Lots of demands and barriers and fines from them.

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