When it comes to managing a business there are many issues that require the time and attention of entrepreneurs and business owners. Sales, marketing and maintaining customer relationships often sit near the top of the list. For many, it’s exhilarating to see the company grow, deliver valuable solutions and interact with clients. After all, most go into business because of their passion for the work and the value it delivers. It’s what they find exciting, engaging and what fuels their passion and purpose. While that’s certainly important, there are other business priorities that require attention such as human resources, accounting, taxes and payroll. While not as “glamorous” for many it’s important to understand your various filing and reporting obligations. Many Denver companies often ask us about whether they are required to file Form 1099-MISC and when they are due. To help clients, prospects and others understand the reporting and filing rules, Hanson & Co. has provided a summary of key employer information below.
Do I Need to File Form 1099-MISC?
There are many different types of 1099 Forms so it’s important to be specific when answering this question. The general rule is that a Form 1099-MISC needs to be filed when your business pays $600 or more in a single year for services performed by non-employees, prizes, and awards, and health and medical service providers, crop insurance proceeds, and qualifying proceeds paid to an attorney.
It’s important to note that in general, that following do not need to be reported:
Payments made to a corporation;
Payments for merchandise;
Freight rental and storage.
Payments made by debit card, credit card, or Paypal
When are the Filing Deadlines?
There are two filing deadlines that apply depending on the type of income being reported. According to IRS Publication 1220, any company reporting non-employee compensation (NEC) must be filed on or before January 31, 2019. If the company is reporting other types of compensation and is filing electronically with the IRS it is due on or before April 1, 2019. Concurrently, businesses are responsible for providing a copy of Form 1099 to the recipient no later than January 31, 2019 (although some limited exceptions exist).
Penalties for Non-Compliance
Unfortunately, the IRS does assess a penalty if a company fails to file the form with them or furnish it to the recipient with cause. In 2016, the IRS passed new regulations that allow the number of penalties to increase with inflation, which means penalties for missed deadlines may increase each year. Violations for the 2018 tax year vary based on when the missed filing is made. For filings made not more than 30 days after the deadline the penalty is $50 per return, between 31 days and August 1st the penalty is $100 per return, after August 1st the penalty is $260 per return and if intentional disregard is determined the penalty is $540 per return.
Most businesses have filings that need to be issued to recipients and filed with the IRS. While Form 1099 is one of the more commonly known, there are several other informational returns your company may be responsible to file. If there are questions about whether you have a Form 1099 or other filing requirements or need assistance with an accounting or tax issue, Hanson & Co. can help! For additional information please call us at 303-388-1010 or click here to contact us. We look forward to speaking with you soon.