Avoid IRS Penalties: 1099 Filing Date Moved Up This Year


Would you like to avoid IRS penalties in your business? Do you engage the services of an individual also known as an independent contractor? We mean, other than one who meets the definition of an employee. Did you pay him or her $600 or more for the calendar year? The IRS requires you to issue the sub-contractor a Form 1099-MISC to avoid penalties and the prospect of losing the deduction for the independent contractor’s labor and expenses in an audit?

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1099 Filing Due Dates

1099 Filing Requirement for Independent Contractors

This year it is not business as usual, however, since a law change took affect with regard to 1099 reporting. The law requires the IRS to move up the filing due date by a whole month to January 31, 2017. This is for both the IRS filing and providing a copy to the service provider. This earlier filing date is part of the government’s effort to combat tax filing fraud.

What Else Does the 1099-MISC Report?

Form 1099-MISC is also used to report payments made by a business for rents and royalties, as well as to attorneys for legal services, among others. When there are no independent contractor payments to report, the 2016 1099-MISC form for other payments continues to be due to the IRS by February 28, 2017, which is the normal due date.

Avoid IRS penalties by filing on time

You should note that when reporting both independent contractor and other payments, the due date is January 31. This is so you can avoid IRS penalties due to late filing with regard to independent contractor payments.

What is the most a contractor can make without requiring a 1099 Form?

It is not uncommon to have a repairman out early in the year, pay the person less than $600, then use their services again later in the year. This could result in a total for the year that exceeds the $599 limit. As a result, another way to avoid IRS penalties, is to not overlook the information from the individual that you need to file the 1099-MISCs for during the year.

What should I get when I hire an independent contractor?

To start, make sure you get a Form W-9 from each independing contractor that you hire. It is good practice to always have individuals who are not incorporated complete and sign an IRS Form W-9 the first time you engage them and before you pay them. You can avoid IRS penalties when you make sure they properly complete and sign Form W-9 for all independent contractors and service providers. This eliminates any oversights and protects you against IRS penalties and conflicts. Further down in this blog we will discuss the W-9 in more detail.

IRS Form W-9 Protects You as a Business Owner

IRS Form W-9, Request for Taxpayer Identification Number and Certification, is provided by the government as a means for you to obtain the data required to file 1099s for your vendors. It also provides you with verification that you have complied with the law in case the vendor gives you incorrect information. We highly recommend that you have all vendors complete a Form W-9 before you engage in business with them. The W-9 is for your use only; you do not submit it to the IRS.

Create a process to manage infomation for sub-contractors

We recommend that you establish a procedures when hiring an independent contractor to help you avoid negligence. Going forward, require that each non-corporate independent contractor and service provider fill out a W-9 and return it to you. Write a brief and gentle note, and enclose the W-9 instructions published by the IRS. You can be extra nice and enclose a self-addressed stamped envelope just to make it easier for your vendor. We recommend that you get the hard copy and file it in a safe place under lock and key. You can scan these forms, however, you must encrypt the file and have it password protected. The W-9 will include either an EIN (Employee Identification Number) or a SSN (Social Security Number).

Penalty for Failing to File Returns

The penalty for failure to file the required informational returns is substantial and is $260 per informational return. For a correct, but late information return, tthe penalty is $50, but you must file it no later than the 30th day after the January 31, 2017, required filing date. Or, it is reduced to $100 for returns filed after the 30th day but no later than August 1, 2017. Those businesses that are required to file 250 or more information returns, must file them electronically.

How do I avoid a penalty on 1099s?

In order to avoid a penalty, copies of the 1099-MISCs you’ve issued for 2016 that include independent contractor payments in box 7 need to be sent to the IRS by January 31, 2017. They must be submitted on magnetic media or on optically can answer them.scannable forms (OCR forms).

Worthtax prepares 1099s for submission to the IRS. This service provides recipient copies and file copies for your records. Use the 1099 worksheet to provide this office with the information needed to prepare your 1099s. Any questions you have, Alex Franch, BS EA at Worthtax can answer them. Give him a call at 781.849.7200.

Also, get a jump on this year’s tax season because it has already started. Call our office for an appointment today, so you can beat the rush. Worthtax has locations in Quincy, Weymouth and Dedham or book your appointment online. Remember, it is better the money is in your pocket.

Sources and Resources


For more information, call Alex Franch at 781.789.7200. WorthTax has locations in Norwell, Dedham, and Weymouth, Massachussetts.
Alex Franch

Mr. Franch is a Tax Specialist and Partner at Joseph Cahill & Associates / WorthTax. He has a diverse background including a Bachelor of Science from Boston College in Mathematics and extensive military service. Mr. Franch is an Enrolled Agent and has eight years of tax preparation experience. He has been serving individuals, families, and businesses for several years with tax and financial planning strategies and is a junior partner with the firm. Mr. Franch is licensed by the Financial Industry Regulatory Authority (FINRA) with a Series 6, 63, 65, and 7, and by the Commonwealth of Massachusetts Division of Insurance.

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