There are more independent contractors working now than ever before. If you own a business, no matter its size, you will likely need to prepare a 1099. If you need to prepare just one version of a 1099, you may think it will be okay to skip the process. However, the IRS keeps close tabs on 1099 filings. In most cases, you will receive a penalty for a late 1099 – even if you have a reasonable excuse.
Keep in mind that the IRS also asks business owners to answer two important questions on their federal income tax returns: Whether the business or corporation made payments that would require to file a 1099 form, and whether you filed the appropriate 1099. If you neglect to send the required forms after indicating that your business needed to do so, you will be subject to a penalty – even if the late 1099 is submitted just a few days after the deadline.
As always, the best way to avoid a late 1099 filing is to be prepared. The W-2/1099 forms filing platform from Advanced Micro Solutions is one of the best 1099 tools available. Prevent late filings in the first place and get ahead with an AMS software suite.
Changes to Late 1099 Filings
In 2016, the IRS upped its late 1099 penalties. Effective January 1 of that year, penalties for not filing correct information, as well as for not furnishing correct payee statements, increased and became subject to inflationary adjustments. This change affected all types of 1099 forms, as well as forms 1098, W-2G, and W-2.
The penalty amount is now based on when you, the employer, files the correct information return or furnishes the correct payee statement to the IRS. These are separate penalties. Now, penalty rates are determined based on incremental lateness. For example, if returns are filed and/or furnished less than 30 days after the deadline, employers must pay a $50 fee per return or statement, up to $556,500 total (as of 2020). If those returns are more than 30 days late, the fee more than doubles to $110.
While this may seem like a reasonable fee, the penalties can add up – even for small businesses. The best solution to a late 1099 filing is to avoid penalties altogether. The best way to do that? An integrated accounting software solution, like that offered from AMS.
More About the 1099 Late Filing Penalty
There are a few reasons why your 1099 may be considered “late,” even if you thought it was submitted on time. If the form is incorrectly prepared, filed on paper when it was required to be filed electronically, or filed in a way that prevents it from being processed, the IRS will consider it to be late. Using a software tool, like the filer from AMS, is a great way to avoid cause for penalty.
Our W-2/1099 filer is the required tool in our software catalogue. Perfect for businesses of most sizes, it has what you need to quickly, efficiently, and accurately prepare any number of W-2 and 1099 filings. Whether you’re looking to avoid a late filing or simply want to streamline your business’s accounting, this is a great tool to use.