What happens if I don't file a 1099 for my subcontractors?

[hfurlong32]

I didn't realize that you had to fill out the 1099 form before starting a new return until today - 4 days before taxes are due so, late for the January 31 deadline. What happens if I don't file a 1099? In years past, I have subcontracted for other companies and have never received a 1099 from them.

[MaryK1]

People and companies that make payments of miscellaneous income to individuals must give the payee Form 1099-MISC by the end (in most cases) of February of the year following the tax year in which the income was paid. However, if the payment is for non-employee compensation to be shown in box 7 of Form 1099-MISC, then it is required to be filed by January 31st.

The paying institution or individual must issue Form 1099-MISC by January 31, 2018. If the institution fails to do so, the penalty against the company varies from $30 to $100 per form ($500,000 maximum per year), depending on how long past the deadline the company issues the form. If a company intentionally disregards the requirement to provide a correct payee statement, it is subject to a minimum penalty of $250 per statement, with no maximum.

[hfurlong32]

How will the IRS know that I didn't file them? I've never received a 1099 in the past for my subcontract work over 600.

[MaryK1]

You are correct, in most cases the IRS will not know unless there is an audit (which is possible but rare) or if someone who was supposed to get one from you reports it.

[hfurlong32]

Thank you!

[hfurlong32]

@TurboTaxMaryK1 - if I file them now, will I know right away if there is a penalty attached?

[MaryK1]

If you file them late, you will receive a separate notice if the penalty is assessed, but often they will not assess if you it is a new business or only have a few.

[hfurlong32]

@TurboTaxMaryK1 - Thank you again! It is not my 1st year, and I know you don't care about excuses but, last year, I had to order the forms and they came in June! So, this year I avoided trying to file in January - I had NO IDEA that it was so easy to file at the start of TurboTax!! This is not my 1st year in business. I love to procrastinate and am just now getting to my taxes. I only have 3 subcontractors and the amounts are not much over $1000.

[MaryK1]

While it is important to get the returns filed, the IRS is not really looking to fine people.

[hfurlong32]

@TurboTaxMaryK1 - If I do file the 1099, it generates a 1099 and sends it to my subcontractors, so will anything happen to them? Let's assume that we don't know if they are claiming the money. And, let's assume that they've already filed. Thank you again for your time and consideration!

[MaryK1]

If they reported the income without the 1099, it is okay.  If they did not report it, he will have to amend to add it and would owe some additional taxes (because he would have the social security/Medicare) so there would be penalty/interest added to his personal return for filing late.

[hfurlong32]

@TurboTaxMaryK1 Thank you thank you thank you!!! Now I know! I love TurboTax and LOVE those of you that are here to help us out when we are in a jam (whether it's user error, nincompoopiness or that we just plain don't understand!)  🙂

[MaryK1]

You are welcome, please ask anytime!