New Penalties for 1099s in 2012

This applies to those operating a “trade or business”. Below is an excerpt from the instructions and some exceptions that apply to the reporting rules. The instructions are lengthy and we cannot reproduce in entirety in this post. For more details or if you have questions, please contact your tax advisor.

The penalty for not filing the required 1099s is increasing up to a maximum of $250 per 1099 not filed with the IRS and an additional maximum of $250 per 1099 not given to payees, for a total of $500 per non-filed 1099.

Your 1099 filings should be distributed to the recipients by January 31, 2012.  As a reminder, any payments for services to anyone or a business that is not listed as a corporation, and has been paid $600 or more, should receive a 1099.  If they don’t have Inc. or Corporation in their name, you need to get a Form W-9 from those businesses or individuals.  For the most part, you should be issuing LLCs 1099s also.

NOTE:  For those of you paying for services performed in the Louisville/Metro area, you are required to complete the Form 1099-SF by indicating the total paid in non-employee compensation and exactly what portion was for services performed within Louisville/Metro Kentucky. 

Excerpt from IRS Publication 1099 MISC instructions:

Trade or business reporting only. Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements. Other organizations subject to these reporting requirements include trusts of qualified pension or profit-sharing plans of employers, certain organizations exempt from tax under section 501(c) or (d), farmers' cooperatives that are exempt from tax under section 521, and widely held fixed investment trusts. Payments by federal, state, or local government agencies are also reportable.

Tagged 1099, Accounting, Taxes