This tax season, you’ll need to file a 1099 form if you work with self-employed people or people who do gig work. You may miss a deadline or send an incorrect return if you have to keep track of many different due dates and forms. When that happens, the IRS will send you a notice of a 1099 late filing penalty (or penalties) that tells you what you need to pay to fix the problem.
Getting a notice from the IRS can help you know the deadlines and penalties and how to reduce or eliminate them.
What does “1099” mean?
1099 is an “information filing form” that tells the IRS about non-salary income. There are 20 kinds of 1099 forms. Most people get a 1099-NEC for compensation from a non-employee and a 1099-MISC for income from rent, hiring an attorney, or winning a prize. Also, the 1099-NEC form is used to report income that is likely subject to self-employment tax, while the 1099-MISC form is used to report income that is not likely subject to self-employment tax.
When you pay an independent contractor, gig worker, or another self-employed person more than $600 in a given year, you must fill out a 1099-NEC form for each worker. Read these 1099 reporting requirements to find out more about the form.
useful link: reporting non-employee compensation form
1099 filing deadlines
You might know about 1099 forms, but did you know you have to send a copy to your contractors and the IRS?
To make things more complicated, each form has a different deadline. Copy B of Form 1099-NEC must be sent to your payees by January 31, and Copy A must be sent to the IRS in person by March 1 or electronically by March 31. You can also send Copy 1 to the tax office in your state, though the rules vary from state to state. If those dates fall on a weekend or holiday, the deadline moves to the first business day after the weekend or holiday.
By sending in Copy A, you show the IRS what you pay your non-salaried workers. By filing Copy B, you give your independent contractors plenty of time to file their self-employment taxes and fix any mistakes in their financial records.
If you’re worried about filling out 1099 forms, you’ll love how easy our 1099 report is to use. You’ll see the names of each contractor, the total amount you paid them during the tax year, and when and how you paid them. It’s easy to update contractor information or figure out whether a transaction is NEC or MISC—send a message to your bookkeeper through the app, and they’ll help you.
what happens if you miss the 1099 deadline?
You might feel scared if you get a 1099 late filing penalty from the IRS. Why am I getting in trouble? Why do they want so much money? Can I help in any way?
The answer to that last question is almost always a resounding “yes,” but it helps to know how the IRS figures out penalties. This can help clear up any confusion and make it easier to spot false charges since even the IRS can make mistakes.
First, the IRS gives fines for not sending in the correct information return on time and for not sending in the right payee statements. These fines add up, so you miss five information return deadlines. You will have to pay five penalties, one for each late return.
Here are the fees for each payee statement or information return that needs to be corrected or needs more information.
The IRS will also add interest if you don’t pay these fines. If the IRS notice is valid, it’s a good idea to pay as soon as possible.
The easiest way is to pay online with a bank account, credit card, debit card, or digital wallet. You can also send a check or money order through the mail or pay cash at a retail partner or your local IRS office.
Need to pay your fine in full right now? Pay what you can and apply for a payment plan for what you can’t immediately pay. Even though there are fees for the payment plan, it’s still cheaper than the interest you’d have to pay if you didn’t.
One of the payment plan options is a long-term monthly installment agreement. This is an option if you have filed all required tax returns and owe up to $50,000 in tax, penalties, and interest. There is also a short-term payment plan that you can use if you owe less than $100,000 in taxes, penalties, and interest. This plan lets you pay off your debt in 180 days.
getting rid of a 1099 late filing fee
The IRS makes mistakes sometimes, and you may find that the reason you are being fined needs to be validated. In these situations, you can challenge the 1099 late filing penalty.
In the top right corner of your IRS notice, there will be a number you can call for free. You can also write them a letter explaining why they made a mistake. In both cases, you should have the notice with you and explain the penalty (or penalties) you want them to consider, such as a late filing penalty on a 1099-NEC form, and why each penalty should be removed.
useful link: guide to IRS 1099 form filing
When you get a letter from the IRS, sometimes it will tell you how to dispute any penalties. If you don’t do what they say, your dispute might not be solved.
When you look over your notice from the IRS, keep an eye out for the following:
- Carefully read the IRS’s explanation of the notice to find out why you are getting it (reasons include late filing, failure to pay, or wrong payee information). This is important because it will tell you what proof you need to send with your dispute letter.
- Take a close look at the address your notice was received from—mail any letters of dispute to the IRS address on the letter that clearly explains your appeal rights.
Need more help or have yet to receive a letter? There are more online resources on the IRS website to help you make your case better.
1099 penalty relief
You could make a mistake if this is your first time doing your taxes. Even if you’ve filed before, as a small business owner, you have a lot of other things to worry about. You might miss a deadline, but you have a good reason for doing so. The good news is that you can explain yourself. The IRS knows that we’re all humans, and they can lower or get rid of the penalty.
To get a penalty removed, you must show the IRS that you did what you did in good faith and for a good reason. There is a long list of things that qualify as reasonable causes. The most important thing is that you tried your best before and after the failure and that the failure was caused by things you couldn’t change.
For example, if your system went down for a week and you couldn’t send in electronic filings on time, that would be a good reason. In the same way, a death or severe illness in your immediate family that kept you from filing would also count.
But not knowing the rules or deadlines for filing or forgetting to send in a particular form is usually not a good enough reason. For a specific accuracy-related penalty, you may still get some relief if you can show you tried your best to give correct information.
Your IRS notice should tell you how to ask for penalty relief, just like it tells you how to file a dispute. You can usually request this by calling a toll-free number. Keep your notice close so you can refer to it, and tell the IRS which penalty (or penalties) you want to get rid of and why.
Don’t give up on getting relief if the IRS can’t do it over the phone. With Form 843 , you can follow up and ask for help in writing.
conclusion
When you get a notice from the IRS about a penalty, it can be scary and add more stress to a time that is already difficult.
By working with someone who can help, you can reduce your stress and the list of things to do during Tax season. Countick handles your accounting so you can focus on running your business. From our small business tax checklist to how to properly pay yourself as a business owner, countick helps you all year. We’ll also let you know when deadlines are approaching, so you can relax and file on time.
If you already use countick to keep track of your books, your plan includes filing 1099s. Log in and message your bookkeeper to get started.
We’d love to give you a free trial to show you how easy it is to file your 1099 forms with us. In just one business day, we’ll finish your books from the month before and make your income statement. Begin your free trial today.
