Oh 1099’s, they’re like a 4-letter word. There is so much information out there on the requirements for issuing 1099’s, yet I’m always amazed at how misinformed our clients are on who should actually receive them! Thankfully, if you’re an accounting client of ours, we help take that off your hands. The bigger question is what happens if you don’t issue them by the deadline or at all?
It might not be top of your mind until tax season, but as we enter that time of year — let’s look at the actual consequences for not sending over a 1099 BEFORE you fulfill your invoices. Reminder, it’s never a good idea to mess around with tax forms, be it tax season or any other time of the year. If you’re not fulfilling your back office tasks and tax obligations, well, it’s just not a recipe for success. Here’s what happens if you don’t send a 1099 form to a vendor.
You could incur penalties from the IRS
So, if you forget to send a 1099 form to a vendor or independent contractor who is owed one, what happens? Well, unfortunately, you could be facing a penalty from the Internal Revenue Service (IRS). The penalty for not issuing a required 1099 varies from $50 to $280 per form, depending on how far past the deadline you issue the form. However, if you intentionally disregard the requirement to provide a correct 1099, it’s subject to a minimum penalty of $570 per form or 10% of the income reported with no maximum. Yikes!
You may not be able to claim the expense on your tax return
If you don’t send a vendor or independent contractor a 1099 form when they should get one, you may not be able to claim the expense on your tax return, which could lead to a larger tax bill for your business.
Short answer: It’s best to issue 1099 forms to all vendors and independent contractors you work with
So, to avoid any potential penalties or issues, it’s crucial to properly issue 1099 forms to vendors and independent contractors. This ensures that both you and the vendor or independent contractor are in compliance with tax laws. Trust us, it’s not worth the headache or extra cost to skip this step.
In summary, don’t forget to send out those 1099 forms to vendors and independent contractors. It may seem like just another task on your to-do list, but it’s an important one to make sure everyone is following the rules and avoiding any potential issues.
Do you have someone in charge of your back-office tasks? If you don’t feel great about it, it might be time to make a switch.