The IRS has published on its website (Increase in Information Return Penalties) a notice reminding businesses of the changes in due dates for information returns this year along with more significant penalties. The notice provides:
Beginning with the 2016 tax year, the due dates for filing Forms W-2 and W-3 with SSA will be January 31 of the following year, whether you file using paper forms or electronically. Form 1099-MISC will be due to the IRS by January 31 of the following year when you’re reporting non-employee compensation payments in box 7. Otherwise, file by February 28 if filing by paper, March 31 if filing electronically.
Penalties for late filing or providing forms late to recipients have been increased. Penalties could be as high as $530 for each Form 1099 not provided to recipients and another $530 if not furnished to IRS. The notice reminds taxpayers that a separate penalty applies for the failure to provide those forms to recipients and for failing to file them with the taxing agency. The IRS notes “For example, if you fail to file a correct Form 1099-MISC with the IRS and don’t provide a correct Form 1099-MISC statement to the payee, you may be subject to two separate penalties.”
Even more alarming, IRS has been going after “backup withholding” of 28% during audits. ‘Backup withholding’ means IRS assumes since a Form 1099 was not issued/filed that the payor withheld federal taxes of 28% from the compensation for services. Unless the payor has a valid Form W-9 showing the payee is exempt from 1099 requirements, or the payor can demonstrate that the recipient reported the income, IRS is attempting to collect this 28% from the payor, in addition to the two penalties discussed above. Needless to say, this can add up quickly.
Please contact us if you have any questions or if you need assistance preparing the above mentioned forms.