1099's Are Due January 31 - New Penalties Are Quite Punishing

If your business pays non-employee individuals, LLC's, or partnerships for services and those payments exceed $599 per vendor, you need to file 1099 Information Reports. These reports are due on January 31st. The penalties for not filing these forms have increased substantially over the past few year.  Additionally,The state of Oregon now has the power to disallow your deductions for Wages and Sub-contract, or outside services where the appropriate information return has not been filed timely.  That is a big deal.  It is more important than ever for our small business clients to stay on top of these filing requirements and due dates.  See the high-lights of the 1099 reporting rules below:

• If you pay any individual, partnership, or LLC $600 or more for services then you must file a form 1099 no later than January 31.  
• 1099's are also due for rent paid to any non-corporate payee.
• If you file copies of 1099s late with the IRS, but within 30 days of the due date, then the IRS assesses a penalty of $50 per late 1099. I believe this is $50 for the payee copy and another $50 for the IRS copy.
• If you are running more than 30 days late on your Form 1099s, but complete and submit them by August 1, the IRS may assess a more severe penalty of $100 per late form.
• The potential penalty increases still further after August 1, with 1099s still outstanding meriting fines of up to $260 per form.
• The penalty is increased to $530 per missed form if the IRS deems that the failure to file is due to intentional disregard of the filing requirement.
• Additionally, Oregon has a new enforcement tool in their box.  If a form 1099 or W-2 is not filed timely, they may disallow your deduction for the item - so the wages or sub contract costs paid. This applies no matter how late the form.  It is only likely to come up in audit but the potential loss is so large that I would not disregard that possibility.

These requirements are applicable to payments made  in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements.  Rental operations that rise to the level of a business are also subject to these rules.  Most rental owners are considered to be engaged in a passive activity rather than a business so would not need to issue 1099's.