Forgot to Send 1099-NECs? You need to read this.
It’s almost that time of the year when 1099 taxes are due. Although most companies have their returns sent to the IRS and the nonemployee, many businesses forget to file on time due to the administrative hassles of managing a business. If you belong to this category and have not filed your taxes yet, this blog post will be of help.
What is form 1099?
Form 1099 is an IRS form used to report tax. There are many different types of 1099 forms. But we will be talking about form 1099-NEC. 1099-NEC is a newly introduced form that will be used for reporting nonemployee compensation (NEC) from 2021 onwards.
You need to send out one copy of the form to the IRS and second one to the nonemployee(s) to whom you’ve paid at least $600 in compensation over the course of the year. The IRS does not permit companies to send 1099 forms to their permanent employees. If they find out that you filed a form 1099-NEC for a payroll employee, they will penalize you.
Forgot to file or issue your form 1099-NEC?
If you forgot to file your form 1099-NEC or made a mistake while filing it, you need to act fast. The longer you ignore the filing, the more penalty you will have to pay.
The IRS will impose fine for late filing as well as for not furnishing that correct payee statement. Additionally, some states are required to file online, while others are required to mail it to the IRS. If you accidentally e-file a form that should’ve been mailed or vice versa, the IRS will penalize you.
The late filing penalty is $50 per form if you file within the 30 days of the due date. If you file after 30 days, but before August 1 of the filing year, the penalty is $110 per form. If you file after that or do not file at all, then the penalty is $280 per form. Additionally, if you continue to ignore your tax filing ,the IRS will impose a penalty of $550 per form.
Similarly, you need to issue form 1099-NEC to the nonemployee as well. If you fail to provide the form to nonemployees to whom you have paid over $600 during the year, you may be subject to separate penalties. If the IRS finds that you intentionally failed to issue the form, the penalty will be $530 per form.
When is the due date?
January 31st is the due date to submit your form 1099-NEC. By this date, you’ll need to submit your form both to your contractors and to the IRS. You can rely on an IRS-approved e-filing provider like Freelance Central to file your form online with the IRS. you can send the recipient’s copy via email or mail.
Do you get a filing extension?
If you believe that you will not be able to file your form 1099-NEC on time, you can request for an extension. You need to submit two extension requests: one for sending your 1099-NEC to the contractors and one for your IRS filing.
In your letter, you must include the name, TIN, address, and signature of the payer, as well as the type of return, a statement that the extension is being requested to provide statements to recipients, and the reason for delay. Extension requests for reporting nonemployee income in Box 1 of Form 1099-NEC must be submitted by paper to:
Department of the Treasury
Internal Revenue Service Center.
Ogden, UT 84201-0209
How to ensure timely filing:
No matter how busy you are, you always need to find time to file your taxes. The IRS does not take kindly to non-filers and you can end up in unforeseen circumstances if you plan to evade tax.
- Ensure that you keep a reminder ahead of the due date so you have enough time to furnish both the copies and send it to the IRS and the contractor
- Keep record of all your invoices. When the deadline is approaching, you shouldn't struggle to find the documents required to furnish the form. Always practise good recordkeeping so that you have access to all the information you need, at all times.
- Rely on an e-filing partner to file your taxes, if your state laws allow for it. E-filing providers like Freelance Central offer timely alerts to remind you that the filing deadline is fast approaching.
- Even if you fail to file on the due date, make sure you pay the tax immediately so that you can avoid big penalties and interests being imposed on you.
No matter how busy you are, you must prioritize timely tax filing so that you can avoid the unnecessary hassles that late filing heralds. Especially when it comes to the newly introduced form 1099-NEC. There is lots of uncertainty and confusion surrounding the filing formalities, but when you have a smart e-filing partner like Freelance Central to rely on, rest assured that your tax filing will take care of itself.