January 22, 2016
As a business owner, you’re aware that many payments you make to unincorporated taxpayers (individuals, LLCs, partnerships) require that you prepare a Form 1099 to provide to that payment recipient and the Internal Revenue Service each year. In general, you must provide a 1099 to anyone who falls under the above categories that you paid for services and where your total payments exceeded $600 during the year. The exemption from reporting payments made to corporations does not apply to payments for legal services. Therefore, you must report attorney's fees which exceed $600 to corporations that provide legal services.
Penalties for not filing these returns with the IRS and/or not providing them to the payment recipient were relatively benign in past years, but over the last few years, those penalties have been increasing. Starting this year (for statements filed after 12/31/15), those penalties are rising dramatically. You can be liable for penalties of $250 each per 1099 for failure to file with the IRS and/or failure to provide to the recipient, and you can be subject to an additional $250 for each of these if they find that your failure to file/provide was intentional disregard of the rules.
We saw few of these penalties actually assessed in the past, and the IRS was more willing to waive them – but that’s not likely to be true going forward.
If you file your own 1099s, please remember that the recipient copies are due out by January 31st, and the Internal Revenue Service copies are due February 29th. If we prepare these forms for you, please get us the information immediately so that they can be prepared timely.
Call our office at (541) 388-7888 for more information or if you have questions.
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Period of Limitations: