So now that January 31st is behind you, do you have a nagging feeling in the back of your mind that you may have forgotten to do something? 1099s! Many small business owners do not obtain a w9 from their paid contractors prior to issuing that first payment. When this happens, and January rolls around, you may find it challenging obtaining that w9. Or, if you missed the January 31st deadline, now is not the time to think, “Well, perhaps I’ll make the deadline next year”… Let’s say you receive the w9 in February, should you still file a 1099? The answer is absolutely! This is because in 2016 the fines/penalties for not filing a 1099 increased and the penalty is based on when you actually do submit it. If you never submit the 1099 and it is shown that you had “intentional disregard,” the penalties will be even higher. For informational returns like 1099s, the penalties are now also subject to inflationary adjustments. So not only is accuracy of the 1099 important (incorrectly filing), but so is the timely filing. These can be two separate penalties!
Penalties for not filing correct information returns (Code Section 6721) may apply if you:
- Don’t file a correct information return by the due date and a reasonable cause is not shown;
- File on paper when you were required to file electronically;
- Don’t report a Taxpayer Identification Number (TIN);
- Report an incorrect TIN; or
- Don’t file paper forms that are machine readable
Penalties for not providing correct payee statements (Code Section 6722) may apply if:
- You don’t provide a correct payee statement by the applicable date and a reasonable cause isn’t shown;
- All required information isn’t shown on the statement; or
- Incorrect information is included on the statement.
So the bottom line here is that if you forgot to file or were unable to file due to not obtaining a W9, don’t give up! Keep working to obtain the correct information to show your due diligence (and document the requests with email as well)! And file when you can. Remember, the IRS doesn’t “go away” and nor do the penalties if you have managed to attain them. The best thing to do in any situation is file the return, whatever the type of return, as soon as you can and always respond quickly to any IRS notice you may receive. And remember, if you are unsure or have questions about any tax matters, make sure to ask a professional.