The IRS is serious about tax obedience, and 1099 compliance is one of the most important aspects of that effort. The 1099 is the IRS’s most popular form, and so ensuring it is completed correctly is an important task. These forms alert the government agency to businesses and contractors who make money that should be subject to income tax. If a person is not 1099 compliant, they are evading the income tax. On a broad scale, this could severely diminish America’s tax revenue and budget.
In addition to harming the country’s tax revenue, which is important for essential government and physical infrastructure, incorrectly filing a 1099 can result in fines and fees. If you’re worried about the 1099, we’ve included a compliance guide below.
What does 1099 Compliance Mean?
1099 Compliance means correctly filling out the 1099 form. That said, it’s not always as easy as it sounds. The 1099 is a tricky form with several iterations, and so knowing what information you need to report where can be difficult. Below, we’ve outlined some of the touchstones in 1099 compliance.
- Who provides 1099 forms? Employers and business owners who utilize nonemployees (independent contractors) over the course of the year must provide each contractor, as well as the IRS, with a 1099 form if that individual was paid $600 or more in a tax year.
- When is the deadline? Employers must file 1099s with the IRS by January 31st, whether you plan to file by paper mail or electronically. The penalty for late 1099 filing is $50 per form if late for 30 days or less and $100 per form if more than 30 days late. These fines can add up, so get your forms out as soon as possible.
- Is there a separate form for non-employment compensation? Currently, non-employment compensation is reported in Box 7 of the 1099 MISC. While the IRS has released a version of the 1099 NEC, it has not been officially approved.
For other questions you may have about the 1099, see our 1099 MISC Question and Answer page. This robust resource is designed to help you out of most sticky situations. If you have a question that isn’t answered, and if you already have our W2 and 1099 Software, contact us directly. We can walk you through it.
Finding a 1099 Compliance Software that Works
The best strategy for ensuring accurate 1099 filing is to find a software tool that works for you and your business. Our software was voted best in 1099 and W-2 Compliance Software by a reader poll. Readers in CPA Practice Advisor were asked to choose which tool they prefer for 1099 compliance and W-2 compliance, and the results were clear: professionals love our software.
Similarly, AMS Payroll, a companion software product, was voted #2 in the Payroll category. 1099 compliance software involves more than filing your forms on time. You’ll also need the information to be correct. The best way to do that is to combine 1099 filing with your payroll process – an easy feat with the AMS system. If you have any questions about our software suite, give our Sales and Information team a call at 800-536-1099.