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The 411 on The 1099s

January 9, 2017

We begin the New Year with a new filing due date for Forms 1099-MISC. Forms 1099-MISC containing nonemployee compensation in box 7 must be filed with the IRS before January 31, 2017, regardless whether they are filed on paper or electronically. This new January 31, 2017, deadline also pertains to Forms W-2 and W-3 filed with the Social Security Administration.

The due date for the IRS copies of Forms 1099-MISC that do not report nonemployee compensation in box 7 remains February 28, 2017, if you file on paper, or March 31, 2017, if you file electronically.

The recipient copies of the various 2016 Forms 1099 remain the same and must be provided to payees by January 31, 2017, with the exception of Forms 1099-B, 1099-S, and 1099-MISC (only for payments in boxes 8 or 14), which must be furnished to payees by February 15, 2017.

For security purposes, filers may truncate a payee’s identification number, such as only showing the last 4 digits of a social security number (SSN), individual taxpayer identification number (ITIN), adoption taxpayer identification number (ATIN), or employer identification number (EIN), on a payee statement. The IRS copy must still show the full identification number.

Forms 1099 are information returns used to report different types of income to the IRS and the payee. The IRS requires a yes/no response on federal business tax return Forms 1065, 1120, and 1120-S, and on Schedules C and E of Form 1040 on individual returns, to indicate whether the applicable Forms 1099 for the tax year were filed.

Form 1099-MISC is used to report total payments made in the course of a trade or business in excess of $600 to any unincorporated U.S. business or U.S. individual. Reportable payments include payments for services (including parts and materials), nonemployee compensation, rents, prizes and awards, medical and health care payments, and attorney fees. Form 1099-MISC is also required for payments in excess of $10 for royalties or broker payments in lieu of dividends or tax-exempt interest. However, any payments to vendors made with credit cards will be reported by the credit companies themselves and are not required to be included on a payer's 1099-MISC.

Generally, payments made to corporations and tax-exempt organizations are exempt from reporting requirements. However, payments made for legal services, medical and health care payments and substitute payments in lieu of dividends or tax-exempt interest must be reported regardless of whether the entity is a corporation.

The IRS will now enforce larger penalties for non-compliance or incomplete information returns. Penalties for not filing or late filing now range from $50 to $260 per information return, with a maximum penalty of $3,193,000. The IRS is a little more compassionate with small businesses and will only charge a maximum $1,064,000 penalty for business with under $5,000,000 of annual gross receipts. However, if failure to file is due to intentional disregard, the penalty is at least $530 per information return with no maximum penalty limit.

Please contact us with any questions.

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1925 Century Park East, 16th Floor
Los Angeles, CA 90067

(310) 273-2501