Based on a handful of disturbing conversations and online exchanges over the past two days, I feel compelled to send this message to my small business clients:
“This year the Internal Revenue Service has moved forward the deadline for filing information returns for payments that businesses made in 2016 to its contractors. Form 1099-MISC will be due to the IRS by January 31, 2017 of the following year when you’re reporting non-employee compensation payments.
The penalties for late filing, inaccurate filing, and failure to file can be substantial. I notice that many small business firms misunderstand the requirement. Even though the law allows for some cases of penalty relief, I anticipate that the IRS will be generally unsympathetic to claims that taxpayers did not understand the details of their January 31 tax filing obligation.
This message is to remind you that I have not been retained to provide this tax reporting service for your business nor provide and assurance that you are not affected by the filing requirement. I am able to help with the filing or offer assurance that you are not affected by the requirement but only if you act quickly to request assistance”.
Note that there are two potential penalties for each required 1099-MISC form and the IRS has already issued warnings about taxpayers being subject to both types of penalties. Inaccurate information, even if unintentional, triggers the same penalty as other violations.
This information filing requirement deadline is the same even for businesses on a different fiscal year or tax filing year for other types of tax returns.
Several clients seem to have ignored verbal warnings on this issue. My only intent of the written warning is to avoid a “why didn’t you tell me?” situation later.