Forgot to issue 1099-NEC

[chunhuach]

I hired more than 10 contractors to remodel my rental during 2022 and 2023.

Never issued 1099-Nec to them (since I didn't know I need to, especially for LLC, I thought they are bussiness so no need to issue 1099, but later found that if they are not s-corp or C-corp I still need to issue 1099).

I started to collect W9 from them. 

question:

for payments made at 2023, it's already past the 1/31/2024 deadline, do I still continue to issue 1099? do I automatically get fined?

for payments made at 2022, it's way pass the deadline, what should I do?

[RobertB4444]

You should go ahead and issue the 1099s.  You may or may not be fined - a lot will depend on the folks that you are issuing the 1099s to.  If none of them complain about receiving the forms late then that is probably the end of it.  

@chunhuach 

[chunhuach]

Even for 2022?

[DianeW777 · Accepted solution]

There are penalties for not filing the forms when required.  Any service fees you paid for that was related to your business activity would require 1099-NECs to be issued. As a tax professional the advice can only follow the law.  There are penalties for not filing the forms so you must decide if you are going to file the forms for 2022. It's clear they are required to be filed if you meet the criteria.

• Penalties for Missing the Deadline for Filing Forms 1099-NEC or 1099-MISC

You are required to complete and send a 1099-NEC form to any independent contractors or businesses to whom you paid $600 or more in fees, commissions, prizes, awards, or other forms of compensation for services performed for your business.

However, there are some exceptions to who needs to receive one of these forms. You are not required to issue a 1099-NEC to individuals and/or business:

• If you paid for physical products or goods — not services — then this form should not be issued.
• If the business you paid is a C corporation or S Corporation, then a 1099-NEC need not be issued unless you paid the business for medical or health care payments or attorney services. Additionally, the IRS outlines some other specific circumstances where a 1099-NEC should or should not be issued to a corporation.

Another important note is that you should send a 1099-NEC to any business that is an LLC if it is a sole proprietorship. If you’re not sure how a business is classified, you refer to the Form W-9 you should have received from the vendor when you started working with them.

@chunhuach 

[chunhuach]

Thanks! 

I am under the impression for tax returns audit IRS can go back 3 years. What about for missing 1099  in 2022?  Hopefully they won’t check data from 5 years ago:) 

[DianeW777]

It depends.  Unless the IRS finds a compelling reason to check your situation specifically it's unknown if they will find the error.  This usually happens if someone places an inquiry about their own situation that involves your company.

When it comes to an audit, the statute of limitations in general are three years from the due date or two years after the tax was paid whichever is later. However, this is not always the case for returns where there is business activity and, as example, an asset on a tax return relates to another tax return such as a vehicle or equipment that is being depreciated and has not been disposed of.

@chunhuach 

[Edited: 03/02/2024 | 9:05 AM PST]