1099 Penalties?!

Deadlines

There are two deadlines to consider here. The first is the vendor form delivery deadline, 2/2/2015. Forms should be postmarked or e-mailed to vendors by this date. Second, forms must be filed with federal and state agencies. While paper files are due by 2/28/2015, e-files are due by 3/31/2015.

So, what are the penalties for late vendor form delivery, and/or late filing with the IRS? The IRS covers penalties in General Instructions for Certain Information Returns. The IRS penalizes late vendor form delivery and late filings separately. For example, if a vendor form was not postmarked/e-mailed until 2 days after the deadline, the IRS could issue a $30 penalty. If the IRS filing was submitted 15 days after the deadline, the IRS could issue another $30 penalty. The maximum values for these penalties stack on top of each other. 

On the topic of maximum penalties: the cap depends on the size of your business. If the business has over $5 million in annual gross receipts, the IRS classifies the business as "large." The IRS classifies "small" businesses as those with under $5 million in annual gross receipts

We’ve broken down the penalties below.

Penalties

  • Level 1 penalty: $30 per return, for returns filed up to 30 days late
    • Large businesses: maximum penalty of $250,000
    • Small businesses: maximum penalty of $75,000
  • Level 2 penalty: $60 per return, for returns filed more than thirty days late, up to 8/1/2015
    • Large businesses: maximum penalty of $500,000
    • Small businesses: maximum penalty of $200,000
  • Level 3 penalty: $100 per return, for returns not filed, or filed after 8/1/2015
    • Large businesses: maximum penalty of $1,500,000
    • Small businesses: maximum penalty of $500,000

Disregarding the obligation to file can result in a $250 penalty per return, with no cap.

Exceptions to the Rule

The IRS may reduce or waive penalties for late federal submissions if:
  • There was reasonable cause for the late/missing returns
  • The errors or omissions were insignificant
  • A correction was filed by 8/1/2015 for missing or incorrect information
As for failing to provide statements to your vendors, the IRS does not make many exceptions. The IRS only makes exceptions for inconsequential errors or omissions.

Summary

Meeting the deadlines stipulated by the IRS is the best way to avoid late filing penalties.

Tax1099.com also offers tools to keep you in compliance. Two of these tools are TIN matching and W-9 solicitation services. These services can help avoid incorrect filings. Additionally, these services can help provide reasonable cause for errors. Tax1099.com provides fast, secure, and accurate services for your filing needs. Avoid penalties by submitting compliant e-files through Tax1099.com.

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