How to avoid 1099 penalties?

Updated July 9, 2020

There are substantial 1099-MISC penalties that you cannot afford to ignore.

Ignoring 1099-MISC filing requirements could result in hefty penalties. The IRS takes 1099 compliance seriously and uses a lot of resources to make sure businesses follow the 1099 requirements or face severe penalties. The risk of not filing these 1099 filing requirements is not worth the risk.

For a detailed explanation of various penalties associated with 1099-MISC, please check 1099 filing penalties. Here is a brief list of 1099 penalties and how to avoid them:

  • 1099 Late Filing Penalty: You must file your 1099-MISC by the due date. If you fail to file by the due date or file on paper, when you are supposed to file electronically, it can result in a $50 penalty per 1099-MISC form.
  • Penalty for not providing Payee Statement: You must provide payee statements (or recipient copies) by the due date. If you fail to provide recipient copies in time, fail to include the required information, or include incorrect information, there are penalties.
  • Failure to file 1099-MISC electronically: If you are required to file electronically and file on paper without approval from the IRS, you will be subject to penalty.
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    How to avoid 1099-MISC filing penalties?

  • Please follow the 1099-MISC filing due dates carefully. Check the due dates. Notice that there are different dates for filing on paper and filing electronically.
  • Provide recipients their statements by the due date. You may provide payee their statements electronically. You cannot just email payee their statements. There are precise requirements for providing recipients statements electronically. Check out our e-Delivery service for details.
  • Irrespective of how many 1099-MISC you need to file, always file your 1099-MISC electronically. It is both convenient and cost-effective.
  • Make sure you collect tax id (EIN or SSN) from your payees before making any payments using form W-9. Collecting form W-9 in advance saves you from the headache of following up with the payees to obtain their tax ids at the time of filing may delay your filing
  • If you do not have the correct tax id, it may result in you receiving B-notices. It is best to make sure the tax id provided by your payee matches the IRS records and that there are no typos. Consider using our TIN checking service to confirm you have the correct payee tax ids before filing 1099-MISC.
  • If you miss the 1099 filing deadline, please file as soon as possible to avoid a larger penalty as the penalty increase over time. At eFile360, you can file your forms for the current year even after the filing deadline has passed, as well as you can file for the previous three years.
  • If you made a mistake at the time of filing, please correct those errros as soon as you can as the filing penalties increase over time. At eFile360, you can file corrections forms for the current year and for the previous three years. Check how to submit corrections for 1099.
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    Sign up with a 1099 service provider like eFile360 in advance and get timely notification on 1099 filing deadlines.