If you own a business or work a side business that has subcontractors, you may need to issue IRS forms such as Form W-2 and 1099-MISC by January 31.
This applies to employees and others who were paid as part of your business activities throughout the year. Forms W-2s and 1099-MISC forms that contain non-employee compensation in box 7 will have to be postmarked or sent electronically to both the IRS and the person you did business with on or before January 31. Otherwise, you may face fines for each late form.
When to Issue a 1099-MISC Form
Most businesses understand that a W-2 is required for each of your employees. But did you know that you also may need to issue a 1099-MISC to each contractor or vendor you’ve done business with during the year?
The general rule is to issue a 1099-MISC to each individual contractor or vendor you paid at least $600 over the course of the calendar year. This form requirement doesn’t usually apply to your expenditures on hobbies or personal items, just business activities. In most cases you do not have to issue 1099-MISCs to employees at corporations, just other individuals and partnerships you do business with.
You can make filing activities easier by collecting Form W-9 from each vendor to get their tax information at the beginning of the year. These forms should be kept on file for each vendor or contractor and kept updated.
Other examples of business activities that may require you to issue a 1099-MISC include:
Rents paid to a landlord for office space.
Expenses paid to a contractor for work related to the business.
Any payments made to an attorney.
Fraud and Fines
In the past, while most forms were filed by the end of January, you had until as late as March 31 to get the government their copies. The unified January 31 deadline for these forms was changed as part of the IRS’s larger effort to crack down on refund fraud.
Fraudsters have been filing bogus returns early in the year in an effort to snag a refund check before W-2s and 1099s arrive that contradict their returns.
The fines on self-employed and small business owners for missing the filing deadline can be steep. Form W-2 and 1099 late filing penalties are as follows:
$50 per return filed up to 30 days late
$110 per return filed 31 or more days late
$270 per return filed after August 1 or not at all
$550 per return filed for intentional disregard
If you need help getting your forms filed for your business activities, please contact us for advice.