Sending Out 1099s: Don’t Miss The Deadline!
Happy New Year! January is a very important time for many of our clients because it’s time to buckle down on taxes, and they rely heavily on independent contractors. Have you paid someone, or been paid over $600 in 2022? Then, this article is for you.
Tax season can be daunting for any business, but it’s especially important to make sure all of your 1099 forms are sent out by the January 31st deadline unless you’re hoping for a letter from the IRS. In this blog post, we will discuss the consequences of missing the deadline for sending out 1099s, how employees can be penalized, and what an employee can do if the company doesn’t send out 1099s by the deadline.
When a business pays an independent contractor over $600 they are required to report that payment to the IRS, and so is the contractor. Failure to send out 1099 documents by the deadline can result in monetary fines, interest on late payments, and possible criminal charges. At Moose Creek Bookkeeping we specialize in accounting for businesses who regularly hire 1099 independent contractors, so we are versed in the timing, accuracy, and execution of 1099 documents.
According to TurboTax, “If a business fails to issue a form by the 1099-NEC or 1099-MISC deadline, the penalty varies from $50 to $280 per form in 2022. If a business intentionally disregards the requirement to provide an accurate 1099, it’s subject to a minimum penalty of $570 per form in 2022 or 10% of the income reported on the form, with no maximum.” That sounds a little intimidating, we agree – so we are here to help.
Now, if you’re a contractor and your employer fails to send out your 1099 by the deadline, you may be in a difficult situation so it’s important to communicate with your employer if the end of January rolls around and you have yet to see your document. If you fail to report your income, the IRS can fine you 20% of the unreported income, plus the originally owed amount. Whether your employer sends out a 1099 or not, it’s up to you to report your income, even if you have to estimate to avoid any penalties.
So, as you’ve learned, the timing is everything when it comes to issuing and reporting 1099-NEC or 1099-MISC. If you are unsure about the difference between the two, or just have basic accounting questions, please reach out. We take pride in providing the most accurate books to our clients whether they are a large company with 100 independent contractors or a small company with just four W-2 employees, we can bring accuracy, clarity, and confidence to your books at tax time and beyond.