The rocketing federal deficits have spurred congress to make another effort to force the underground cash basis economy to file returns and pay their tax. Their solution – larger penalties for taxpayers who fail to file 1099s.
As a general rule, businesses should issue a 1099 to everyone (who is not incorporated) that they pay more than $600 to during a calendar year. In the past, penalties were minor and seldom enforced. Those days are over. If you don’t file accurate and complete 1099s for 2010 you will be subject to the following penalties for each 1099 not filed:
- $30 to $100 per failure (depending on when and whether the failure was corrected) to file a 1099 with the IRS.
- $30 to $100 per failure (depending on when and whether the failure was corrected) to furnish a 1099 to the person you paid.
- Both these penalties can be increased by the IRS to $250 if they decide that the failure was due to an intentional disregard of the law. This means that the maximum penalty per person can reach $500.
- Some good news: the maximum total penalty amount is “only” $500,000 per year for small companies (Aren’t they just being generous!)
The failure to file K-1s for partnerships and s-corporations has also increased dramatically. This penalty has increased from $89 per month, per partner/shareholder to $195 per month, per partner/shareholder. The penalty is only for the first twelve months the K-1’s are late. If you had two partners and failed to file an extension by 03/15/11 and filed a year later this penalty would add up to $4,680 plus interest. OUCH!
You better pay attention to those due dates. One way is to sign up to our email list and receive our due date reminder emails. Just go to www.wjb-cpa.com and enter your email in the box in the upper right hand corner.